Harness the power of automatic dividend reinvestment to accelerate wealth building.
*Illustration: 4% starting yield, with dividends and share price each growing 5% a year, before tax
DRIP (Dividend Reinvestment Plan) automatically uses your dividend payments to buy more shares of the same investment. Instead of receiving cash, you get fractional shares that compound over time.
Example: At a steady 3% yield, 100 shares become about 134 after 10 years of DRIP without investing another dollar, because each payment buys more shares. A rising share price would slow this a little, since each dividend buys fewer shares.
| Year 10 | Year 20 | |
|---|---|---|
| DRIP: portfolio value | $23,674 | $56,044 |
| DRIP: yearly income | $869 | $2,057 |
| Cash: portfolio value | $16,289 | $26,533 |
| Cash: yearly income | $621 | $1,011 |
| Cash: dividends received so far | $5,031 | $13,226 |
*$10,000 initial, 4% starting yield, dividends and price each growing 5% a year, no contributions, before tax. Taking cash is not lost money: you hold that cash separately. The advantage of DRIP depends on what you would otherwise do with it.
Enable DRIP only for your core holdings while taking cash from others.
DRIP ON: SCHD, VYM, VIG (quality growers)
DRIP OFF: JEPI, JEPQ (take income for rebalancing)
Take dividends as cash but manually reinvest into underweight positions.
Combine automatic reinvestment with regular contributions.
Monthly Plan:
• DRIP reinvests ~$200 in dividends
• You add $500 fresh capital
• Total monthly investment: $700
• Result: Accelerated compounding
Use DRIP differently in taxable vs tax-advantaged accounts.
See how DRIP accelerates your wealth building:
Yes, in taxable accounts you owe taxes on dividends even if reinvested. Track your cost basis carefully.
Most brokers allow fractional share DRIP, ensuring every penny is reinvested.
Bear markets are ideal for DRIP—you're buying more shares at lower prices.
Contact your broker or check account settings. Most offer automatic enrollment.