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Dividend reinvestment (DRIP) projector
Two income lines, one decision: every reinvested payment buys shares that themselves pay dividends. See what that loop does to your income over decades.
A very high starting yield is often the market pricing a cut; 2 to 4.5% with growth is the durable zone.
The gap between those income lines is reinvestment doing its quiet work: every reinvested payment buys shares that themselves pay dividends. The strategy in one line: reinvest everything while you accumulate, flip the switch to income the day you need it. Inside an ISA the whole loop runs tax-free. These are projections on smooth assumptions; real dividends arrive lumpy and occasionally get cut.
Both income lines and both pots, saved.
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Straight answers
Does reinvesting dividends really make that much difference?
Over a year or two, barely. Over decades, compounding does the work: reinvest a 3% yield growing 6% a year and the income it throws off roughly doubles every twelve years, without you adding another dollar. The two lines in the chart show the gap for your own inputs, so you do not have to take the claim on trust.
Is a higher dividend yield always better for reinvestment?
No. Yield rises when the share price falls, so an unusually high yield is often the market pricing in a cut. A moderate payment that grows tends to beat a large one that gets cancelled halfway through your compounding window. Check the payout against free cash flow before trusting any yield.
Are reinvested dividends taxed?
Usually yes. In most places dividends are taxable in the year they are paid even if you reinvest them immediately, unless the shares sit inside a tax shelter such as an ISA, a SIPP or an IRA. This tool does not model your tax, so check the rules where you live.
Educational information, not financial advice. Figures current as of July 2026 where dated; allowances and rates change, so check the source before acting.