Calculator
Dividend reinvestment compounds — see by how much.
A dividend reinvestment plan (DRP) buys more shares with every payout instead of paying you cash. Model the difference over time and watch the two paths pull apart.
Portfolio value over time
Reinvesting versus banking each dividend
Simplified model: annual compounding, fractional units allowed, and no tax applied inside the projection. Real DRPs allocate whole shares and carry the small residual forward. General information only, not financial advice.
How dividend reinvestment plans work in Australia
When an ASX-listed company you own pays a dividend, you normally receive cash. If the company offers a dividend reinvestment plan (DRP) and you opt in, that cash is instead used to buy additional shares in the company — usually with no brokerage, and sometimes at a small discount (commonly 1–5%) to the prevailing market price. Over years, each new parcel of shares earns its own dividends, which buy still more shares: the compounding engine this calculator makes visible.
DRPs allocate whole shares. If your dividend doesn't divide evenly into the share price, the leftover cash (the "residual") is carried forward and added to your next distribution. This calculator simplifies that by allowing fractional units, so its numbers are marginally smoother than a real plan — the direction and magnitude of the effect are unchanged.
The tax point people miss
Reinvesting does not make a dividend tax-free. In Australia, a reinvested dividend is still assessable income in the year it's paid, exactly as if you'd taken the cash — and any franking credits still attach and still flow through to your tax return. You're taxed on money you never saw as cash, so you need to fund the tax from elsewhere.
Reinvestment also matters for capital gains tax. Each reinvestment is treated as a separate share purchase with its own cost base and its own acquisition date. Come sale time you may have dozens of small parcels to track. Keeping clean records as you go — parcel by parcel — saves considerable pain later, and determines whether the 50% CGT discount applies to each parcel.
A worked example
You put A$10,000 into a stock at A$50 a share — 200 shares — yielding 4%, so A$2.00 per share, or A$400 in year one. Under a DRP, that A$400 buys 8 more shares (at A$50), taking you to 208 shares. Next year's dividend is paid on 208 shares, not 200 — and so it builds. Hold flat prices and a flat dividend and the reinvested position grows at 4% a year: about A$14,802 after ten years. Taken as cash instead, you'd still own 200 shares worth A$10,000 plus A$4,000 of banked, uninvested dividends — A$14,000. The A$802 gap is compounding, and it widens the longer you hold and the more prices and dividends grow. Adjust the inputs above to see it on your own numbers.
Common questions
Is a DRP always better than taking cash? +
Not automatically. Reinvesting compounds your holding and often avoids brokerage, which is powerful over long horizons. But it concentrates more money into a single company, gives you no cash to rebalance or spend, and you still owe tax on the reinvested amount. Whether it suits you depends on your goals, diversification and cash needs.
Do I still pay tax if I reinvest instead of taking cash? +
Yes. A reinvested dividend is assessable income in the year it's paid, and franking credits still apply. Because you receive shares rather than cash, you'll need to cover the tax from other funds. This calculator deliberately applies no tax so you can see the gross compounding effect — your after-tax outcome will be lower.
What about the cost base for capital gains tax? +
Each reinvestment is a separate share purchase with its own cost base and acquisition date. When you eventually sell, each parcel's gain (and its eligibility for the 50% CGT discount, which needs a 12-month hold) is worked out separately. Keeping a running parcel-by-parcel record as dividends reinvest is far easier than reconstructing it years later.
Why does this calculator allow fractional shares? +
Real DRPs buy whole shares and carry any leftover cash forward to the next distribution. Modelling that residual exactly would clutter the projection without changing the story, so we allow fractional units and compound annually. The result is a close, slightly smoothed approximation of a real plan.
This calculator is general information only and not financial or tax advice. It uses a simplified model: annual compounding, fractional units, constant assumed growth rates, and no tax, brokerage or DRP discount inside the projection. Real returns, dividends and prices vary year to year and can fall as well as rise. Figures are illustrative. Consider advice from a licensed professional who knows your circumstances before acting.
See dividends on a real company
Every covered ASX company has a full dividend-per-share history, payout ratios and valuation models — all traced to filings.