Dividend Reinvestment Calculator
Enter your holding, its dividend yield and the growth rates you want to assume. See how reinvesting dividends compares with taking them as cash, year by year.
Ending Value incl. Cash Dividends
$20,426.04
Ending Share Value
$20,426.04
Ending Shares
186.4436
Total Dividends Received
$7,044.89
Dividend Income in Final Year
$683.07
Yield on Cost in Final Year
13.66%
How it works
The year-one dividend per share is today's price times the dividend yield. Each later year the dividend per share grows at your dividend growth rate and the share price grows at your price growth rate.
At the end of each year the holding pays the year's dividend per share on every share owned. If you reinvest, that cash buys more shares at the year-end price, so the next year's dividend is paid on a larger holding. If you take cash, the share count never changes and the dividends are added up as cash received (the cash is not assumed to earn anything).
Yield on cost is the year's dividend income divided by what the original shares cost. It rises as the dividend grows, and faster still when dividends are reinvested, because the income is then paid on more shares. It describes your income relative to your original outlay, not the yield a new buyer would get.
Formula
D₁ = price today × dividend yield dividend per share in year t: D_t = D₁ × (1 + g_d)^(t−1) share price at end of year t: P_t = price today × (1 + g_p)^t dividends_t = shares × D_t reinvest: shares += dividends_t ÷ P_t cash: cash += dividends_t yield on cost_t = dividends_t ÷ (starting shares × price today)
Example
100 shares at $50 with a 3% yield pay $1.50 a share, $150, in year one. With dividends growing 5% a year, the price growing 4% a year and every dividend reinvested, after 20 years you would own 186.4436 shares worth $20,426.04, having received $7,044.89 in dividends. Final-year income is $683.07, a yield on cost of 13.66% on the original $5,000.
Taking the dividends as cash instead leaves you with 100 shares worth $10,955.62 plus $4,959.89 of dividends collected, $15,915.51 in total, and final-year income of $379.04 (7.58% on cost).
Assumptions and limitations
- The dividend yield, dividend growth and price growth are assumptions you enter and are held constant. Real dividends can be cut and prices can fall.
- Dividends are paid once a year at year-end and reinvested at that year-end price, with fractional shares and no fees or discounts.
- Taxes on dividends are not deducted; in a taxable account you would owe tax each year even when you reinvest.
- Cash dividends taken are added up without interest and without inflation adjustment.
- Results are estimates for planning and are for informational and educational purposes only. They are not financial, tax or investment advice.
Frequently asked questions
Why does my yield on cost keep climbing?
The denominator is fixed at what you originally paid, while the dividend grows each year and, if reinvested, is paid on more shares. A high yield on cost says your income has grown; it does not mean the shares are a better buy today.
More in Finance calculators.