Phase 2 · Wealth & Leverage
DRIP Compounder
Reinvested dividends buy shares that buy more shares. Watch the snowball build, your yield-on-cost climb, and see exactly how much reinvesting beats pocketing the cash.
Under the hood
The math, fully exposed
We track shares year by year as dividends and contributions buy more of them — and run a no-reinvest twin to isolate the snowball:
Each year: dividends = shares × dividend-per-share
New shares = (dividends + annual contribution) ÷ price
Then: price ×= (1 + appreciation); dividend ×= (1 + dividend growth)
Value = shares × price
Yield on cost = annual dividend income ÷ total invested
- The snowball is non-linear: early dividends are tiny, but each reinvestment buys shares that compound for every remaining year — so the benefit accelerates toward the end of the horizon.
- Growth beats yield: a moderate yield that grows usually out-compounds a high static yield, because rising dividends lift both your income and your yield on cost over time.
- Real vs nominal: these are nominal figures. Subtract inflation if you want the result in today's purchasing power.
Your directives
What to do next, based on your numbers
Adjust the sliders to generate tailored recommendations.
Answers
Frequently asked questions
What is a DRIP (Dividend Reinvestment Plan)?
A DRIP automatically uses each dividend payment to buy more shares instead of paying cash. Those new shares pay their own dividends, which buy still more shares — a compounding snowball. Over long horizons, reinvested dividends have historically driven a large share of total stock-market returns.
What is yield on cost?
Yield on cost is your current annual dividend income divided by what you originally invested — not the current price. As a company raises its dividend year after year, your yield on cost climbs far above the headline yield. A stock bought at a 3.5% yield can pay 8–10%+ on your original cost a couple of decades later.
Does reinvesting dividends really make that big a difference?
Yes — this calculator shows the gap directly. Reinvested dividends buy shares that compound for the rest of the holding period, so the longer the horizon the larger the advantage over taking dividends as cash. The effect is small early and dramatic late, which is the nature of compounding.
What is a dividend yield trap?
An unusually high yield (well above peers) is often a warning, not a gift — it can mean the share price has fallen because the market expects a dividend cut. A sustainable, growing dividend at a moderate yield usually compounds to more than a high but fragile one. Treat very high yields with caution.