Dividend Reinvestment Calculator

What changes between full and partial reinvestment?

At 100%, every after-tax dividend buys more shares. At a lower percentage, that share of each payment is reinvested and the rest is kept as cash, which this model holds outside the portfolio and does not grow.

With the worked example’s $10,000 at 4% for one year, reinvesting 50% at a 25% tax rate ends at $10,150.85, with $150.85 kept as cash. The comparison below the result shows 0%, 25%, 50%, 75% and 100% for your own inputs.

Company DRIP or broker reinvestment: does it matter here?

A company dividend reinvestment plan uses your dividends to buy more of that company’s shares, usually through an agent. A broker’s reinvestment program does the same inside your brokerage account. Each sets its own terms: fees, purchase timing, whether fractional shares are credited and, in some company plans, a price below market value.

This calculator models none of those terms. It buys at the generic payment-date price with no fees, so check your plan’s terms against these assumptions.

Sources: SEC Investor.gov: Stocks – FAQs; IRS Publication 550: Investment Income and Expenses

How are taxes and fractional shares handled?

Your single flat tax rate comes off every dividend first, including dividends you reinvest; only the after-tax amount buys shares. For U.S. federal income tax, IRS Publication 550 says dividends used to buy more stock must still be reported as income. Actual treatment depends on the account type, how the dividend is classified, and where you are taxed. Deducting tax at each payment is a simplification, since in practice tax may be paid later, and account types such as IRAs are not modeled.

Purchases buy fractional shares, so every reinvested dollar is invested. If your plan or broker buys whole shares only, part of each dividend may be left as cash instead.

Source: IRS Publication 550: Investment Income and Expenses

Taking dividends as cash or reinvesting them: what is the trade-off?

Reinvesting adds shares, so later dividends are paid on a larger holding; the result shows how much more annual income that produces than taking every dividend as cash. Taking cash gives you the income now, to spend or invest elsewhere, while the share count stays where it was.

Reinvesting also keeps adding money to the same holding. The calculator shows the numbers for each choice; which one suits you depends on circumstances it does not know.