How it's calculated
Let P0 = today's share price, y = dividend yield, gd = dividend growth, gp = price growth and f = payments per year. Period j = 1 … f·years falls in year k.
Share price at payment j: price_j = P0 · (1 + g_p)^(j / f)
Annual dividend per share, yr k: DPS_k = P0 · y · (1 + g_d)^(k − 1)
Dividend paid at payment j: shares_before · DPS_k / f
After-tax dividend: dividend · (1 − tax rate)
Reinvested shares bought: after-tax dividend / price_j
Contribution shares bought: (yearly contribution / f) / price_j
Annual dividend income today: starting amount · y (= starting shares · P0 · y)
Yield on cost in year k: dividends paid in year k / total money put in by the end of year k
(starting amount + contributions)
- The yield you enter applies to today's price. The dividend per share then grows at the dividend growth rate (raised once a year), while the price grows smoothly at its own rate, so the yield on the current price drifts if the two rates differ.
- Each payment is calculated on the shares you held just before it, then reinvested at that day's price. Contributions are invested on the same dates, after the dividend, so they start earning from the next payment.
- Not reinvesting: dividends are held as cash that earns nothing, and "total value" = shares × price + cash.
- Fractional shares, no commissions, no dividend cuts, constant growth rates. Real dividends and prices are not this smooth.
- Unrealistic inputs are flagged. If dividends grow much faster than the price, the dividend eventually becomes larger than the share price itself and reinvesting buys shares explosively. The calculator warns when the dividend passes 20% of the price, and if values would pass $1 quadrillion it stops at the last year below that and explains why, rather than printing meaningless 50-digit numbers.
- Taxes. The optional tax field applies one flat rate you choose to every dividend. In a taxable US account, qualified dividends are taxed at the lower long-term capital gain rates and other (ordinary) dividends at your regular income tax rate; see IRS Topic 404, Dividends.
- Check: if price and dividends grow at the same rate g with annual payments, shares multiply by exactly 1 + y/(1+g) each year; with no growth at all, by 1 + y. Our automated tests confirm both, and every scenario is also recomputed by a separate Python program using decimal arithmetic.
Worked examples
1. No growth: dividends alone
100 shares at $50 with a 4% yield paid once a year, price and dividend flat, all dividends reinvested. Each year the dividend buys 4% more shares, so after 10 years you own 100 × 1.0410 = 148.0244 shares worth $7,401.22. All $2,401.22 of the gain came from reinvested dividends. Load this example
2. Growing dividends, reinvest vs. cash
$10,000 at $50 a share (200 shares), 3% yield paid quarterly, dividends growing 5% a year, price growing 4% a year, plus $1,200 invested each year for 20 years. Reinvesting: $94,737.88 and 864.74 shares, paying about $3,441.63 over the next year. Taking dividends as cash instead: $78,552.98 in total (531.02 shares plus $20,376.43 cash). Load this example
3. Same as #2 in a taxable account
With a 15% tax on dividends (you enter your own rate) and the tax paid out of each dividend, the reinvested total is $87,888.60, with $3,981.11 of tax paid over 20 years. Load this example
Frequently asked questions
How does a dividend reinvestment calculator work?
It simulates every dividend payment: the dividend is your share count times the dividend per share, and if you reinvest, it buys more shares at that day's price. Those new shares then earn dividends of their own, which is where the compounding comes from.
What is the difference between dividend growth rate and share price growth?
Dividend growth is how fast the company raises its payout per share (many established dividend payers have raised theirs by a few percent a year, but raises are never guaranteed). Price growth is how fast the stock price rises. They often move together over long periods but don't have to; this calculator lets you set them separately.
How do I calculate annual dividend income?
Multiply the amount invested by the dividend yield, or the number of shares by the annual dividend per share. $10,000 invested at a 3% yield (this page's default) pays $300.00 a year, shown as "annual dividend income today" in the results. Later years change as dividends grow and reinvested dividends buy more shares.
What is yield on cost?
The dividends received in a year divided by the total money you put in (your starting amount plus contributions, not counting reinvested dividends). If dividends grow, yield on cost rises over time even if the current yield stays the same. The results show it for the last year, and the table shows it for every year.
Are reinvested dividends taxed?
In a regular taxable US account, yes: dividends are generally taxable in the year paid even if reinvested. Qualified dividends are taxed at long-term capital gain rates and other dividends as ordinary income (see IRS Topic 404). In tax-advantaged accounts such as IRAs and 401(k)s they generally are not taxed when paid. Enter your own rate in the optional tax field; this site doesn't give tax advice.
Should I reinvest dividends or take the cash?
That depends on your goals and isn't something a calculator can decide. Reinvesting buys more shares and usually leads to a larger balance; taking cash gives you income now. The calculator shows both outcomes so you can compare.
Spotted an error?
Accuracy matters more than anything else here. If a number, formula or explanation on this page looks wrong, please email a correction. The email opens with this page's link, including your current inputs, already filled in. What to include in a report.