Model the compounding effect of automatically reinvesting every dividend received.
Reinvesting makes each dividend buy shares that pay further dividends, so the yield compounds alongside the price. Taking dividends as cash leaves them idle, which over twenty years is a substantial difference even at modest yields. Reinvestment is the largest single component of long-run equity returns, and it is entirely passive once switched on.
Dividend Reinvestment
Reinvested value = investment × (1 + price growth + yield)^years
Reinvested value = investment × (1 + price growth + yield)^years Reinvesting makes each dividend buy shares that pay further dividends, so the yield compounds alongside the price. Taking dividends as cash leaves them idle, which over twenty years is a substantial difference even at modest yields.
Reinvestment is the largest single component of long-run equity returns, and it is entirely passive once switched on.
This calculator takes 5 inputs: Initial investment, Dividend yield, Annual share price growth, Annual dividend growth, Years held. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.