Financial Calculators
Dividend Reinvestment Calculator
Dividends that buy more units earn more dividends. Over decades, that is most of the return.
Value with dividends reinvested
₹84,18,207
- Holding value plus cash dividends
- ₹61,43,645
- Dividends taken as cash
- ₹14,82,688
- Extra from reinvesting
- ₹22,74,562
Reinvested dividends buy more units, which earn more dividends: compounding on two fronts. Dividends are taxed at your slab in the year received, which this comparison leaves out; a growth-option mutual fund reinvests before tax, which is why it usually beats the dividend option.
These figures are for illustrative purposes only and are not investment advice. Please consult your investment adviser for investment related advice.
Compounding on two fronts
A share or fund that pays a dividend and grows in price rewards you twice. Take the dividend as cash and you get the price growth on the original units plus a pile of cash that does nothing. Reinvest it and every dividend buys more units, which earn more dividends and more price growth. Over long periods the reinvested path pulls far ahead.
This is why the growth option of a mutual fund usually beats the dividend (IDCW) option: it reinvests automatically, before tax.
Reinvested versus cash
Reinvested: units x= (1 + yield) each year; value = units x price\nCash: value = price + sum of dividends on the original units\nPrice grows at g each year; dividend = yield x priceWorked example: Rs 10,00,000 in a holding yielding 3% with price growing 8% a year becomes Rs 84,18,207 in 20 years with dividends reinvested, against Rs 61,43,645 as price growth plus Rs 14,82,688 in cash dividends. Reinvesting adds Rs 22,74,562.
Frequently asked questions
Are dividends taxed?
Yes, at your slab in the year received, whether you reinvest or not. The calculator ignores this; a growth-option fund avoids it entirely by never paying out, which makes its lead larger than shown here.
What if I need the income?
Then a dividend or SWP is the right tool, and the cash path is your path. The calculator is for money you do not need yet.
Do Indian companies pay a 3% yield?
Most large companies yield 1-2%; PSUs and some sectors yield more. Enter the actual trailing yield of what you hold.
Is this the same as a mutual fund's dividend reinvestment option?
In principle. In practice the reinvestment option pays tax on each dividend first, so the growth option comes out ahead for the same fund.
Let the dividends work as hard as the principal.
We default clients to growth options and set up SWPs only when income is actually needed.