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The DRIP snowball

A hypothetical $10,000 at a 4% yield, reinvested versus taken as cash over 30 years with no price change: how reinvested dividends buy shares that pay dividends.

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In one paragraphReinvested dividends buy more shares, and those shares pay dividends too. In a hypothetical $10,000 holding yielding 4%, reinvested once a year with no price change or dividend growth, reinvesting grows the position to about $32,434 in 30 years versus $10,000 plus $12,000 of cash taken out.
DRIP snowball, hypothetical $10,000 at 4%Reinvesting grows the holding to $32,434 in 30 years; taking cash leaves $10,000 invested plus $12,000 of dividends received.$0$13k$25k$38k$50kY0Y4Y8Y12Y16Y20Y24Y28Y30
  • Reinvested (value of shares)
  • Taken as cash (shares + cash received)
YearShares (DRIP)Dividend that year (DRIP)Dividend that year (cash)
0200.0$0$0
10296.0$569$400
20438.2$843$400
30648.7$1,247$400
Hypothetical: $50 share price that never changes, 4% yield, no dividend growth, no tax, reinvested once a year. Real prices and dividends change, and dividends can be cut.

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