Dividend Reinvestment Snowball Calculator
Example: Starting shares owned: 100 shares · Current share price: 50 $ · Annual dividend yield: 3 % · Annual share price growth: 5 % · Annual dividend growth rate: 3 % · Years to compound: 25 years
| Portfolio value after DRIP | $49,340 |
| Total shares owned | 291.4 |
| Total dividends reinvested | $21,551 |
| Total return (%) | 886.80% |
Worked example
Start with 100 shares at $50 (a $5,000 position), with a 3% dividend yield, 5% annual price growth, and 3% dividend growth. Over 25 years of automatic reinvestment, your 100 shares grow to roughly 203 shares, the price rises to $169, and the portfolio is worth about $34,200 — a 584% total return versus roughly 239% without dividend reinvestment.
Frequently asked questions
What is a DRIP and how do I set one up?
A Dividend Reinvestment Plan (DRIP) automatically uses your dividend payments to purchase additional shares (or fractional shares) of the same stock or fund. Most major brokerages — including Fidelity, Vanguard, and Schwab — offer free DRIP enrollment per security. The SEC investor.gov site has a primer on dividend reinvestment basics.
Are reinvested dividends taxed?
Yes — in a taxable account, reinvested dividends are still taxable in the year they are paid, even though you did not receive cash. Qualified dividends (from most U.S. corporations held for the required period) are taxed at long-term capital gains rates of 0%, 15%, or 20%, per IRS rules. In a Roth IRA or 401k, dividends are not taxed when reinvested.
Does dividend growth matter much?
Dividend growth compounds alongside price growth, so even a modest 3% per year increase in the dividend per share meaningfully raises the reinvestment amount over time. Companies that consistently grow dividends — sometimes called Dividend Aristocrats — have historically combined above-average income with above-average total returns.