Dividend Reinvestment (DRIP) Calculator
A Dividend Reinvestment Plan (DRIP) compounds your wealth by using cash dividend payouts to buy more shares, multiplying both capital appreciation and future dividend streams.
How it works
Instead of taking cash dividends into your bank account, DRIP automatically purchases additional stock units. Over long horizons, the combination of growing share quantity and rising stock prices produces supercharged compounding.
Formula
S_t+1 = S_t + (S_t × P_t × y / P_t), P_t+1 = P_t × (1 + g)
Every year's cash dividend is immediately used to buy additional fractional shares, which then earn their own dividends in subsequent years.
| Symbol | Variable | Unit | Description |
|---|---|---|---|
| S_t | Number of shares in year t | count | |
| P_t | Share price in year t | ₹ | |
| y | Dividend yield | decimal | |
| g | Annual share price growth rate | decimal |
Worked example
100 shares @ ₹500 (₹50k initial) with 4% yield & 8% price growth for 10 yrs
- Shares:
- 100
- Price:
- ₹500
- Yield:
- 4%
- Growth:
- 8%
- Tenure:
- 10 years
Starting value is ₹50,000. Through annual dividend reinvestment, share count expands from 100 to 148.02 shares. The stock price grows from ₹500 to ₹1,079.46, delivering a final portfolio worth ~₹1,59,786 (with ₹30,344 in total reinvested dividends).
Limitations
Does not model variable dividend payout cuts during corporate earnings downturns.
Frequently asked questions
How do dividend taxes work in India?
Dividends received from domestic companies are taxable in the hands of investors at their applicable marginal income tax slab rates. Companies also deduct 10% TDS on dividend payouts exceeding ₹5,000 per financial year.
Is DRIP available for Indian stock brokers?
While US brokers have automatic DRIP programs, in India investors generally choose 'Growth' options in mutual funds (which automatically reinvest gains and dividends) or manually reinvest cash dividends into additional shares.
Why are dividend growth stocks popular for long-term wealth?
Dividend-paying companies are usually established, profitable businesses with strong free cash flows. Reinvesting dividends provides downside support during bear markets by accumulating more shares at lower valuations.
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Last reviewed: 2026-08-22.