Dividend Reinvestment (DRIP) Calculator United Kingdom

Each time a share or fund pays a dividend, you can take the cash or put it straight back into more shares. This calculator projects both paths side by side, so you can see how much bigger a lump-sum investment becomes when the income keeps compounding instead of being paid out.

How reinvesting dividends compounds

With a dividend reinvestment plan, each dividend buys more shares. Those shares pay their own dividends, which buy more shares again, the same effect that drives compound interest in a savings account. When dividends are reinvested, the whole return, share price growth plus dividend yield, compounds together year after year. The calculator models this by growing your investment at the combined rate of growth plus yield for the number of years you enter.

What happens if you take the cash instead

If you take dividends as income, only the share price compounds; the dividends stop working the moment they reach your account. The calculator grows the price at the growth rate alone and adds up each year’s dividend as cash. Each year’s dividend is paid on that year’s opening value, so the cash dividends rise gently as the price climbs, but they never buy more shares. The ending value is lower than on the reinvested path, and the gap is what reinvesting gains you.

A worked example

You invest £10,000 in a share you expect to yield 4% a year and grow 3% a year in price, and hold it for 20 years. Reinvesting, the money compounds at 7% a year to about £38,697. Taking the cash, the price compounds at 3% to about £18,061, and the dividends you take over the two decades add up to about £10,748, a total of about £28,809. The difference, about £9,888, is what you gain by letting the dividends compound.

When reinvesting makes the biggest difference

A higher dividend yield gives you more income to reinvest, so more of your return depends on the reinvestment decision. A longer time horizon matters even more, because most of the benefit of compounding arrives in the later years, which is why starting early and staying invested tends to beat trying to time the market. Change the yield, the growth rate and the number of years to see how sensitive the outcome is to each.

Reinvesting inside a tax wrapper

Where you hold the shares affects how much of each dividend you can reinvest. Outside a tax wrapper, UK dividends above the annual dividend allowance are taxed, so part of each payment never goes back into the market. Inside a Stocks and Shares ISA or a pension, dividends are sheltered and can be reinvested in full, so the calculator’s figures are most realistic for money held there. For shares in a general investment account, treat the reinvested figure as a before-tax upper limit.

Assumptions and limitations

This is an illustration for planning, not a forecast. It assumes a single lump sum with no further contributions, a constant dividend yield and price growth rate, and that every dividend is reinvested immediately with no dealing costs or rounding to whole shares. It does not model tax, platform fees, inflation or when individual dividends are paid during the year. Use it to understand the reinvestment decision, then check the details with your broker or an adviser before acting.

About This Dividend Reinvestment Calculator

Use this dividend reinvestment calculator to get an instant estimate based on the figures you enter. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.