Every dividend you reinvest buys more shares, which pay more dividends, which buy more shares. See exactly how a DRIP compounds your wealth over time.
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Start Investing on RobinhoodDividends are assumed paid at each period end and immediately reinvested. Fractional shares are permitted. Additional monthly purchases buy shares at the current price each month.
Reinvesting dividends is one of the most powerful wealth-building tools available to individual investors
Each dividend buys more shares. Those shares pay more dividends. Those dividends buy even more shares. DRIP stacks compounding on top of price appreciation — a double engine of growth.
A stock yielding 3% that grows its dividend 7%/year will be yielding over 11% on your original cost basis in 20 years. Dividend growth aristocrats often outperform high-yield, no-growth payers over time.
DRIP inside a Roth IRA or 401(k) means zero tax drag on reinvestment. Qualified dividends in taxable accounts are taxed at 0–20%. Set your tax rate to 0 to model a Roth scenario.
Monthly dividend payers (many REITs and CEFs) reinvest faster than quarterly payers. Over long periods, monthly reinvestment compounds noticeably more than annual reinvestment at the same yield.
Your yield-on-cost (dividend income ÷ original investment) grows every year as the dividend per share grows. What starts as a 4% yield can become a 15%+ yield-on-cost over 20–30 years.
Look for Dividend Aristocrats (25+ years of consecutive dividend increases), low payout ratios (<65%), strong free cash flow, and industries with durable competitive advantages: utilities, consumer staples, financials.