DRIP ON vs DRIP OFF: veja o efeito bola de neve

What is the dividend snowball effect?

A Dividend Reinvestment Plan (DRIP) automatically uses your dividend payments to purchase additional shares of the same stock or ETF. Each extra share then earns its own dividends - and those dividends buy even more shares. This compounding cycle, often called the "snowball effect," can significantly amplify returns over long time horizons compared to simply pocketing dividends as cash.

DRIP ON vs DRIP OFF: the core difference

With DRIP OFF, every dividend payment goes directly into your cash account. Your share count stays flat (ignoring new purchases), and your ending value is shares × final price plus accumulated cash. With DRIP ON, each dividend immediately buys new shares at the market price on the ex-dividend date. Your share count grows after every dividend event, and each extra share generates future dividends - creating a compounding feedback loop.

For a high-dividend ETF like VYM or SCHD yielding 3–4%, the difference over 20 years can be dramatic - often adding tens of thousands of dollars to a $10,000 initial investment.

How this calculator works

The simulation uses raw price data with explicit dividend events, not adjusted close prices. This means dividends are applied separately on their actual ex-dividend dates so there is no double-counting. Splits are handled by applying split factors forward so all prices are expressed on the same per-share basis as today's price.

On each dividend date, the calculator multiplies your share count by the dividend per share to get total cash received. In DRIP ON mode, this cash immediately buys new shares at the closing price. In DRIP OFF mode, it goes into a separate cash balance. Fractional shares are supported throughout.

Disclaimer