Dividend Reinvestment Calculator

How the two returns combine

Price growth and dividends compound together. Each year the dividend is paid on the current value and used to buy more shares, so next year's dividend is paid on a slightly larger holding:

Value = P × (1 + growth + yield)ⁿ as a close approximation, or exactly P × (1 + growth)ⁿ × (1 + yield)ⁿ when the dividend is reinvested at the same price.

The combined rate here is about 8.15% a year, and 10,000 × 1.0815¹⁰ ≈ $21,900; the calculator's 21,589 comes from applying the components month by month, which compounds slightly less often than a single annual multiplication.

Worked examples

$10,000, 3% yield, 5% growth, 10 years → $21,589
Same inputs, 20 years → about $46,600
Same inputs, 10 years, 2% yield → about $19,700
Same inputs, 10 years, 0% growth → about $13,440

Why reinvestment matters more than the yield

Taking the 3% as income leaves the price growth to compound alone, which is a 5% path. Reinvesting turns it into an 8.15% path. Over ten years that difference is roughly $4,000 on $10,000; over thirty it is most of the final balance. The yield is what you are paid, reinvestment is what you keep.

What the model assumes

• Constant yield and growth. Real dividends get cut, raised and suspended, and prices do not rise in a straight line.
• Reinvestment at the current price. Fractional shares are assumed; a broker that only buys whole shares leaves small cash balances.
• No tax. Dividends are usually taxed in the year they are paid, even when reinvested, so a taxable account compounds less than this.
• No fees. Fund expense ratios come off the total return before any of this happens.

Frequently Asked Questions