Dividend reinvestment (DRIP) calculator

A dividend position has three independent moving parts, and almost every calculator online merges them. The first is the dividend per share, which the company decides and usually raises on an announced schedule. The second is the share price, which the market decides and which sets what each reinvested dividend can buy. The third is the number of shares you own, which is the only one reinvestment actually changes. Quoted yield is not a fourth thing — it is just the first divided by the second, which is why it tells you so little about a position you already hold.

Yield on cost is the figure worth watching instead. It divides this year's income by what you originally paid, so it climbs as the dividend is raised and climbs again as reinvestment adds shares. A position bought at a 4% yield and held through fifteen years of 6% dividend growth with reinvestment is paying far more than 4% on the original money, while the quoted yield has stayed near 4% the whole time because the price rose alongside.

Try setting share price growth to something low and watching the final-year income rise. That is not a bug: reinvestment buys shares at the market price, so a price that goes nowhere is a discount on every purchase you make for the next decade. It is the same arithmetic that makes a long flat market useful to someone still accumulating and painful to someone already drawing down — and it is the strongest argument for separating the accumulation phase from the retirement phase when you plan.

Two things the model does not do. It never cuts the dividend, and real companies do — a projection running twenty years at 6% growth is describing a business that stays healthy for twenty years, which is a stronger assumption than the growth rate itself. And it assumes fractional-share reinvestment, which every major US broker now supports but which was not always the case and still is not everywhere.