DRIP Calculator

Year 1 dividend per share

DPS = sharePrice × annualYield%

= $50.00 × 3.50%

= $1.7500/share/year

Dividend yield is expressed as a percentage of the share price. A 3.50% yield on a $50.00 share generates $1.7500/share annually, or $0.4375 per quarter for quarterly payers.

Standard dividend yield formula — SEC investor disclosure

Year 1 annual dividend income

annualDiv = shares × DPS

= 100 shares × $1.7500

= $175

Your 100 shares generate $175 in year 1. This is the pool available for reinvestment (DRIP) or cash income — the foundational number that compounds into your portfolio's snowball.

DRIP methodology — Dividend Reinvestment Plan mechanics

Shares reinvested (Year 1)

newShares = annualDividend / sharePrice

= $175 / $50.00

= 3.500 additional shares purchased

3.500 fractional shares are bought at $50.00. Next year, these shares also generate dividends — the snowball has started. Each reinvested dividend permanently increases your share count, which earns more dividends, which buys more shares.

Dividend growth over time

DPS(n) = DPS(0) × (1 + divGrowth%)^n

= $1.7500 × (1 + 5.00%)^n

= Year 20: $4.6433/share (vs $1.7500 in year 1)

Dividend growth compounds your income stream even without share count changes. At 5.00% annual growth, dividends roughly double every 14 years (Rule of 72). Combined with share count growth from DRIP, income growth can dramatically outpace inflation.

Dividend growth investing — Gordon Growth Model, Damodaran

Yield on cost (YoC) in final year

YoC = final_DPS / original_sharePrice

= $4.6433 / $50.00

= 9.29% yield on original cost

Yield on cost shows your dividend income relative to what you originally paid. Starting at 3.50% yield, your 20-year YoC grows to 9.29% — because the dividend per share has grown but your cost basis stayed at $50.00. This is a key metric for long-term dividend investors.

Share price appreciation

finalPrice = initialPrice × (1 + priceGrowth%)^years

= $50.00 × (1 + 7.00%)^20

= $193.48/share (3.87× initial price)

Price appreciation alone grows $5,000 to $19,348 — a 3.87× multiple over 20 years. DRIP adds $15,209 on top (78.6% more) by continuously compounding reinvested dividends into more price-appreciating shares.

Final portfolio value (Year 20)

finalValue = totalShares × finalPrice

= 178.60 shares × $193.48

= $34,557

Your 100 initial shares grew to 178.60 shares — 78.60 additional shares from reinvested dividends. The portfolio grew from $5,000 to $34,557.

DRIP snowball vs cash dividend

snowball = DRIP_finalValue − noDRIP_finalValue

= $34,557 − $19,348

= +$15,209 (78.6% more) from reinvesting

DRIP generates $15,209 more than taking dividends as cash — a 78.6% improvement in portfolio value. This is the compounding bonus from buying more shares that then earn more dividends that buy more shares, repeatedly over 20 years.

DRIP compounding methodology — Morningstar, Vanguard investor education

Effective CAGR of DRIP portfolio

CAGR = (finalValue / initialValue)^(1/years) − 1

= ($34,557 / $5,000)^(1/20) − 1

= 10.15% effective annual compound return

Your DRIP strategy delivers a 10.15% CAGR — combining 7.00% price appreciation, 3.50% initial yield, and 5.00% dividend growth. The interaction of all three is worth more than any of them alone.

4% rule monthly income from portfolio

monthly_income = finalValue × 4% / 12

= $34,557 × 0.04 / 12

= $115/month sustainable withdrawal

The 4% withdrawal rule suggests your $34,557 portfolio supports $115/month in withdrawals that survive 30+ years with high probability. This is the income your DRIP compounding translates to in retirement.

Bengen (1994); Trinity Study (Cooley, Hubbard, Walz 1998)