Calculation methodology
What you provide
You provide every assumption. The engine does not predict markets, and default values are examples, not recommendations. All amounts are in US dollars.
- Starting position
- An amount or a share count, and the starting share price.
- Income
- A starting yield or an annual dividend per share, and the payment frequency.
- Contributions
- An amount per period, how often it is added, and yearly growth.
- Reinvestment
- Any share of after-tax dividends from 0% to 100%.
- Tax and inflation
- One flat dividend tax rate and an annual inflation rate.
- Horizon
- Whole years, 1 to 60.
Assumptions you control
12 steps per year
Income, value, cash, tax
What the engine calculates
- Portfolio value
- Shares × share price. Cash kept from dividends is not included.
- Annual income
- Year-end run-rate: shares × annual dividend per share. This differs from dividends actually paid during the year.
- Monthly equivalent
- Annual income ÷ 12. An average, not a payment schedule.
- Cash retained
- After-tax dividends not reinvested. Kept separately; earns no interest.
- Total dividends
- Every gross payment = tax + reinvested + cash kept.
- Yield on contributed capital
- Year-end annual income ÷ (initial investment + contributions). Reinvested dividends are not in the denominator. Not total return.
Contribution timing and dividend payments
Contributions arrive at the start of each scheduled period and buy fractional shares at that month’s price: every month for monthly; January, April, July, and October for quarterly; January and July for twice yearly; January for yearly. Dividends are paid at period end, so new contributions take part in that period’s payment. Ex-dividend dates are not modeled.
- JanContribution
- FebContribution
- MarContribution + dividend
- AprContribution
- MayContribution
- JunContribution + dividend
- JulContribution
- AugContribution
- SepContribution + dividend
- OctContribution
- NovContribution
- DecContribution + dividend
Example: monthly contributions with quarterly payments in March, June, September, and December.
DRIP and partial DRIP
Tax is removed from each payment first. Your reinvestment percentage of the rest buys fractional shares at that month’s ending price; the remainder is kept as cash, which earns no interest.
Shares bought per payment
New shares = gross dividend × (1 − tax) × reinvestment % ÷ share price
Worked example: $10,000 at 4%, quarterly, one year, no growth
- 0% DRIP: the portfolio stays at $10,000 and $400 is kept as cash.
- 100% DRIP: ends at $10,406.04 ($10,000 × 1.01⁴).
- 50% DRIP with a 25% tax: ends at $10,150.85 ($10,000 × 1.00375⁴), with $150.85 kept as cash.
Dividend and price growth
Dividend per share and share price each grow every month by (1 + annual rate)^(1/12). They are independent assumptions, so yield changes over time. By Dividend / Share treats your annual dividend as the input; By Yield uses starting price × starting yield.
Dividend after N years
Dividend = starting dividend × (1 + growth)^N
Worked example
$2.00 growing 5% a year becomes about $3.26 after 10 years; at a constant $50 price, the yield on price is about 6.52%. Neither is a forecast.
Taxes
Applied to every dividend, including reinvested amounts. No brackets, qualified-dividend rules, capital-gains tax, fees, or account types (such as IRAs) are modeled.
Inflation
Used only to express future portfolio value in today’s dollars, compounded annually. Inflation does not change contributions or payouts.
Today’s dollars
Future value ÷ (1 + inflation)^years
$295,168 in 20 years at 2.5% annual inflation ≈ $180,133 today.
Yield cap
Optional. When dividend growth outpaces price growth for decades, projected yield on price can become unusually high; the results flag uncapped yields above 15%. A cap limits the effective dividend each month while the raw growth path continues independently.
Effective dividend
Lower of grown dividend and price × cap
The cap is a modeling choice, not a safety threshold. No cap is the default.
Goal, sensitivity, and stress tools
Income goal
Required capital = monthly goal × 12 ÷ [yield × (1 − tax)]
A positive goal with zero effective yield is unreachable. Sensitivity changes annual dividend growth by ±2 percentage points; “High” means the upper-to-lower monthly-income spread exceeds 100% of the base or the starting yield exceeds 10%, and “Moderate” means the spread exceeds 30%. These are mathematical flags, not risk ratings. The heatmap varies starting yield in 1-point steps and dividend growth in 2-point steps around your inputs. Stress scenarios apply from the start of the projection, not as mid-year events.
Limitations
- No fees
- Commissions, fund expenses, and plan charges are excluded.
- No ex-dividend dates
- Payments follow a generic schedule, not real company dates.
- Cash earns nothing
- Dividends kept as cash earn no interest.
- Constant rates
- Growth, tax, and inflation stay constant unless you change them.
- Not a forecast
- Projections illustrate your assumptions; actual results differ.
- Precision
- Fractional shares and unrounded values; displays round to whole dollars. Growth −50% to 30%, yield 0–30%.
Reproducible checks
| Scenario | Inputs | Result |
|---|---|---|
| No DRIP | $10k, 4% yield, 1 year | $400 cash |
| Full DRIP | $10k, 4%, quarterly, 1 year | $10,406.04 |
| Half DRIP, 25% tax | $10k × 1.00375⁴ | $10,150.85 · $150.85 cash |
| Income goal | $1,000/month, 4%, 20% tax | $375,000 |
| Inflation | $295,168, 2.5%, 20 years | ≈ $180,133 today |
Sources and the boundary of this model
These timing conventions, caps, and accounting formulas describe our own model. They are not prescribed by the sources below.
SEC Investor.gov: Stocks – FAQs explains that dividend reinvestment plans use distributions to buy additional shares and may charge fees. Our model omits fees and actual plan execution rules.
IRS Topic 404: Dividends distinguishes ordinary and qualified dividends. Actual treatment depends on circumstances; the single tax rate you enter does not determine tax liability.
Security identities in the optional search come from public SEC EDGAR files. No price or dividend data provider is connected.
Sources reviewed September 27, 2026. No external reviewer or endorsement is claimed. Report a calculation issue.