Project a holding's value with dividends reinvested and growing — versus simply taking them as cash.
A simplified projection: price grows at the given rate, dividends are reinvested at the (growing) yield. Real dividends, prices, and reinvestment prices vary; taxes on dividends in a taxable account reduce the DRIP advantage. Not investment advice.
Reinvesting dividends buys more shares, which pay more dividends, which buy still more shares — the snowball behind a large share of long-term stock returns. Taking dividends as cash forfeits that compounding, so over decades the DRIP path pulls meaningfully ahead.
For long-term growth, usually — compounding is powerful. But retirees often want the cash income, and in a taxable account dividends are taxed whether or not you reinvest.
A Dividend ReInvestment Plan automatically uses each dividend to buy more shares, often commission-free and in fractional amounts, so nothing sits idle as cash.
Related: dividend yield calculator · compound interest calculator · dollar-cost averaging calculator · all free calculators.
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It uses standard formulas and recalculates the moment you change a value, so the math is exact for the inputs you enter. Treat the result as a reliable planning estimate; for decisions with legal or tax consequences, confirm the figures with a qualified professional.
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