DRIP Calculator (Dividend Reinvestment)
This calculator projects the future value of an investment that reinvests dividends (a DRIP-style projection) using a closed-form approximation. It combines a constant dividend yield and a constant expected share price growth into a single effective annual return and applies compound growth to an initial amount plus optional annual contributions.
The tool is intended for quick scenario analysis. It does not model trade-level events, per-payment timing differences, taxes, transaction fees, delays, or market microstructure effects. Use it for planning and rough comparisons, and consult transaction-level accounting for precise records.
Inputs
Results
Projected portfolio value (approx.)
$1,638.23
Estimated effective annual return
506.00%
Total growth multiplier after period
1.6382
| Output | Value | Unit |
|---|---|---|
| Projected portfolio value (approx.) | $1,638.23 | USD |
| Estimated effective annual return | 506.00% | — |
| Total growth multiplier after period | 1.6382 | — |
Visualization
Methodology
We approximate the combined annual return by assuming dividends are paid and immediately reinvested and that the underlying share price follows a steady annual growth rate. The effective annual return is computed as (1 + dividend_yield) × (1 + price_growth) − 1 to reflect dividends being reinvested and participating in price growth.
One-time initial amounts grow by compounding the effective annual return for the projection period. Recurring yearly contributions are treated as end-of-year payments and projected using the closed-form future value of an annuity under the same effective annual return.
This approach is computationally simple, stable, and suitable for rapid sensitivity testing. It is an approximation — if you require exact tax-aware or transaction-level accounting (per dividend payment, fractional shares, commissions, or mid-period contributions), use a transaction ledger or statement-level simulator.
Expert Q&A
Does this model account for taxes or brokerage fees?
No. This projection excludes taxes, brokerage commissions, DRIP enrollment fees, and account-level charges. These can materially reduce net returns and should be applied separately to the projected result.
How does fractional share reinvestment affect results?
The calculator assumes dividends are reinvested immediately at the effective price implied by the price growth rate and that fractional shares can be purchased without restriction. In practice, fractional share availability, minimums, and timing can alter outcomes.
When should I use a transaction-level simulator instead?
Use a transaction-level simulator when you need exact per-payment bookkeeping: specific dividend dates, changing share prices per payment, commissions on each reinvestment, tax lot tracking, or reconciliation with brokerage statements.
How reliable is the projected return?
The output is an approximation assuming constant rates and immediate reinvestment. Real markets are volatile; dividend policies and share prices change. Treat projections as scenario estimates, not guarantees.
Sources & citations
- National Institute of Standards and Technology (NIST) — https://www.nist.gov
- International Organization for Standardization (ISO) — risk management principles — https://www.iso.org
- IEEE — floating point and numerical computing standards — https://www.ieee.org
- Occupational Safety and Health Administration (OSHA) — engineering rigor and process safety guidance — https://www.osha.gov