Dividend Snowball Calculator
The Dividend Snowball Calculator lets you visualize one of the most powerful forces in long-term investing: compounding dividends through reinvestment (DRIP).
By reinvesting your dividends to buy more shares, you generate more dividends the next year — creating an exponential “snowball” effect that can turn modest starting investments into significant passive income over time.
Dividend Snowball Calculator
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How the Dividend Snowball Works
- Start with an initial investment and current dividend yield.
- Assume realistic annual dividend growth (e.g. 6–10% for strong companies).
- Optionally add yearly contributions and share price appreciation.
- Enable DRIP to reinvest dividends automatically.
- Project 5–40 years ahead and watch the lines diverge: portfolio value grows steadily, but annual dividend income accelerates dramatically.
Why this matters for long-term investors
Most people underestimate the power of dividend compounding.
A stock with a modest 3–4% starting yield but consistent 7–9% dividend growth can deliver 10–15%+ effective yield on cost after 20 years — often with far less volatility than high-growth stocks.
This calculator uses conservative assumptions and shows the difference between reinvesting vs. taking dividends as cash. It’s not a crystal ball (markets, dividend cuts, taxes, and inflation all play a role), but it’s an excellent way to stress-test scenarios and understand why patience + quality + reinvestment wins in value investing.