Dividend reinvestment (DRIP) is one of the most reliable ways to accelerate portfolio compounding. Instead of withdrawing dividends as cash, each payment buys more shares — which then pay larger dividends in future years. Over decades, this snowball effect makes a meaningful difference to final portfolio value.
The calculator above lets you compare two scenarios side by side: reinvesting all dividends (DRIP on) versus keeping dividends as cash while the portfolio still appreciates. The gap between the two lines in the chart shows the direct value of the reinvestment decision.
How the DRIP calculation works
Each year, the model:
- Applies capital appreciation to the start-of-year balance
- Calculates dividends based on the current dividend yield applied to the start-of-year balance
- Adds dividends back into the portfolio (DRIP on) or excludes them (cash)
- Adds your annual contribution
- Grows the dividend yield by the dividend growth rate for the following year
Worked example
- Initial investment: $50,000
- Annual contribution: $6,000
- Capital appreciation: 5%
- Dividend yield: 3.5%
- Dividend growth: 4%/year
- Years: 25
With DRIP: roughly $550,000 final value.
Without DRIP (cash dividends): roughly $420,000 in portfolio value alone.
DRIP advantage over 25 years: approximately $130,000 — or about 31% more in total value.
DRIP in a taxable account — ACB implications
Every reinvested dividend in a non-registered account is a new purchase and must be recorded as an addition to your adjusted cost base. Over years of DRIP, this creates dozens of small ACB adjustments that must be tracked precisely for accurate T5008 reporting.
The DRIP and ACB blog post walks through the exact calculation, and MyCostBase handles ongoing DRIP ACB tracking automatically.
Scope note: This calculator uses simplified annual modelling. It does not account for fractional shares, ex-dividend dates, withholding tax on foreign dividends, or the difference between eligible and non-eligible Canadian dividends. For taxable accounts, consult your broker’s DRIP terms and track each reinvestment event for ACB purposes.