INVESTING CHANNEL
Dividend Reinvestment Calculator (DRIP)
Compare the financial outcomes of reinvesting dividends (DRIP) versus cashing them out.
Calculator Variables
Calculation Overview
Compare DRIP vs. Cash Out dividend strategies to see the compounding power of reinvesting stock dividends.
Mathematical Model & Formula
DRIP = P * (1 + App + Yield)^t
Compounds the principal at the combined rate of stock appreciation and dividend yield.
Variables Defined:
- App: Stock appreciation rate
- Yield: Dividend yield rate
Worked Example Scenario
Scenario: Investing $10,000 at 6% appreciation and 5% dividend yield for 10 years.
- Combined rate = 11% (0.11)
- DRIP = $10,000 * (1.11)^10 ≈ $28,394
Result: Final balance with DRIP is $28,394.
Frequently Asked Questions
What does DRIP stand for?
Dividend Reinvestment Plan. It automatically reinvests stock dividend payouts back into partial or whole shares of the same company.