See how reinvesting dividends adds shares, compares with taking dividends as cash, and changes your yearly dividend income, with dividend growth and price change as your own inputs
Enter the starting investment, the share price, the dividend yield, how often dividends are paid, how fast you assume the dividend and the share price grow, any monthly addition and the number of years. The calculator reinvests each dividend at that period's price and shows the share count, the value, total dividends and next year's dividend income — next to the same holding with dividends taken as cash. Growth rates are assumptions you choose, not forecasts: dividends can be cut and prices can fall.
Each dividend = shares × annual dividend per share ÷ payments a year, and reinvesting it buys dividend ÷ price more shares, which earn the next dividend. With no price or dividend growth, $10,000 in a $100 stock yielding 4% paid quarterly grows to 148.9 shares ($14,889) in 10 years — 1.01^40 times the starting shares — against $14,000 if the dividends were taken as cash.
Using the defaults — $10,000 at $50 a share, 3% yield paid quarterly, dividend growth of 5% a year and price growth of 4% a year — reinvesting reaches 379.2 shares worth $41,539 after 20 years, paying about $1,509 a year in dividends. Taking cash instead leaves 200 shares worth $21,911 plus $9,920 of dividends received. These are illustrations of the arithmetic, not expected returns.
| Year | Shares (reinvesting) | Value (reinvesting) | Value + cash (not reinvesting) |
|---|---|---|---|
| Year 5 | 232.1 | $14,117 | $13,824 |
| Year 10 | 271.2 | $20,073 | $18,576 |
| Year 15 | 319.4 | $28,761 | $24,483 |
| Year 20 | 379.2 | $41,539 | $31,831 |
IRS Publication 550 (2025): if you use dividends to buy more stock at fair market value through a dividend reinvestment plan, you must still report the dividends as income. Qualified dividends are taxed at the lower capital gain rates and ordinary dividends as ordinary income (IRS Topic 404). Each reinvested purchase adds to your cost basis, which lowers the taxable gain when you sell — keep the records. In an IRA or 401(k), dividends aren't taxed when paid.
Dividend yield is the annual dividend ÷ the current share price. Yield on cost is next year's dividends ÷ what you invested; in the example it reaches 15.09% after 20 years because both the share count and the dividend per share grew. Stocks and funds aren't FDIC insured.
A dividend reinvestment plan automatically uses your cash dividends to buy more shares (often fractional shares) of the same stock or fund instead of paying them to you. Many brokers offer it for free on most stocks and ETFs.
Each payment: dividend = shares × dividend per share for the period; new shares = dividend ÷ share price. Add the new shares and repeat for the next payment.
Yes, in a taxable account. IRS Publication 550 says dividends used to buy more stock must still be reported as income for the year they are paid.
In the example above, after 20 years reinvesting ends with 379.2 shares worth $41,539, against $31,831 for shares plus cash dividends (before tax). The difference depends on the yield, the time and how the price moves.
Reinvested dividends buy more shares when the price is lower, but the value of the holding still falls with the price, and a company can cut its dividend. The calculator lets you enter negative price growth to see that case.
Tax rules, limits and pay data change. Check the current figures with the primary source before acting on them.