What dividend reinvestment means
Dividend reinvestment uses cash distributions to purchase more shares of the same investment or another investment. A dividend reinvestment plan is often called a DRIP. As the share count increases, future distributions may be paid on more shares—provided the investment continues making distributions.
How a reinvestment calculator works
A historical reinvestment calculation follows each payment through time. It determines the cash distributed, applies the chosen reinvestment percentage, divides that amount by the relevant share price and adds the resulting shares to the position. Later distributions are then calculated using the new share count.
Divvestor allows partial reinvestment because income investors do not always choose between 0% and 100%. A strategy might reinvest 25% to support the portfolio while using the remaining cash for spending and taxes.
Reinvestment does not eliminate risk
Buying more shares can increase future income and may help maintain the portfolio's value, but it does not guarantee either outcome. If the share price or distribution declines, additional shares may not fully offset the loss. Reinvesting into a falling investment can also concentrate more capital in that position.
Compare several reinvestment levels
Test the same portfolio with no reinvestment, partial reinvestment and full reinvestment. Compare the ending balance, total distributions, amount reinvested and cash retained. The most useful setting depends on whether the goal is current spending, future income growth, principal support or a combination of those priorities.
Test a reinvestment percentage
Move the reinvestment control and see how the same dividend strategy changes.
Related concepts
Learn how to estimate monthly dividend income, compare yield and total return, and understand why some payments may include return of capital.
Educational information only—not investment, tax or financial advice. Reinvestment and historical results do not guarantee future outcomes.