The share-count snowball
Reinvested dividends buy more shares, and those shares pay their own dividends. At a steady 3% reinvestment yield, your share count grows about 3% a year: 100 shares becomes roughly 100 × 1.0320 ≈ 180 shares after 20 years — 80% more shares without investing another dollar. Your ending value then gets both the price growth AND the extra shares, which is why long-run studies attribute a large slice of total stock-market returns to reinvested dividends.
Dividend growth is the quiet multiplier
A company that raises its dividend 5% a year doubles the payout roughly every 14 years (rule of 72). Combine a growing payout with a growing share count and the cash stream compounds twice over — your yield on original cost climbs far above the sticker yield. This is also why chasing the highest current yield can backfire: an 8% yield that gets cut beats a 3% yield growing 8% a year only briefly.
When to reinvest and when to take cash
Reinvest during accumulation years — it's automatic, commission-free at most brokers, and removes the temptation to time re-entry. Take cash when you're living off the portfolio, when you want to rebalance the proceeds elsewhere, or in a taxable account where you'd rather direct new money than add tax lots. Note that dividends are taxed the year they're paid whether or not you reinvest them.
How to use this calculator
Enter your current share count, the share price, the dividend yield, and your assumptions for annual dividend growth and price growth, then toggle reinvestment on and off. The calculator shows both paths — reinvesting versus taking cash — including ending shares, portfolio value, and total cash collected. Keep the growth assumptions conservative: 5-7% dividend growth reflects established payers, while double-digit forever is fantasy. Use the comparison to decide where you are in your investing life. During accumulation, reinvesting compounds your share count automatically and removes the temptation to time re-entry; once you're living off the portfolio, taking the cash — or redirecting it to rebalance — is the point. In taxable accounts, note dividends are taxed the year they're paid either way.