Hypothetical illustration based on the inputs above. Assumes dividends are reinvested at the prevailing share price with zero friction (no broker fees, no fractional-share gaps).
Real dividends can be cut, suspended, or grow more slowly than projected.
A dividend reinvestment plan (DRIP) uses each dividend to buy more shares instead of paying it to you as cash. Because you own a few more shares every time, the next payout is calculated on a larger share count, so the income compounds quietly over the years.
Start with 100 shares of a $50 stock (a $5,000 position) paying a flat 3% a year. Reinvest every dividend for 20 years at a flat price and you’d hold about 181 shares paying roughly $271/year, versus the unchanged $150/year you’d collect if you took each dividend as cash.
Judging a dividend stock on its headline yield alone. Two stocks with the same yield can end up far apart once you account for the compounding that reinvestment adds.