U.S. dividend DRIP model — project portfolio growth, qualified-dividend income, and the crossover when dividends exceed contributions.
Year 20 portfolio
$640,547
Passive income
$13,328/yr
Reinvest dividends (DRIP)
Compound net dividends after tax
Assumes qualified dividends in a taxable account. Does not include state tax or NIIT surcharges.
Snowball crossover
Year 13
Passive dividends exceed your annual contributions.
A dividend snowball reinvests the dividends you receive to buy more shares, which then pay more dividends. Combined with regular contributions and dividend growth, your passive income can eventually exceed what you put in each month.
It's the effect of reinvesting dividends to buy more dividend-paying shares, so each year's income is larger than the last — like a snowball gathering size as it rolls.
A dividend reinvestment plan (DRIP) automatically uses your cash dividends to buy additional shares, usually without trading fees, so your share count compounds over time.
Yes. Qualified dividends are taxed at long-term capital gains rates (0%, 15% or 20% depending on income), while ordinary dividends are taxed as income. Dividends in tax-advantaged accounts such as IRAs may not be taxed annually.
Many established U.S. dividend payers yield between 2% and 5%. Very high yields can signal risk that the dividend may be cut, so look at payout ratios and free cash flow too.