Tool · dividends
Reinvested dividends
Getting a dividend feels good, but every time you take it, the taxman gets a slice before it's invested again. Compare three paths with the same investment: reinvesting without taking it, taking it, paying the tax and reinvesting the rest, or taking it and spending it.
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Assumptions and how it's calculated
What it compares. Three people buy the same thing on the same day. The first doesn't take the dividends: they are reinvested inside without tax (like an accumulating fund). The second takes them, pays the tax and reinvests what's left. The third takes them, pays the tax and spends them. All three see the price and the dividend per share rise at the same pace.
How it's calculated. Year by year. The first year's dividend is the dividend yield on the starting price, and after that it grows by the percentage you enter. It's paid at the end of the year; whoever reinvests buys new shares at that moment's price.
What it leaves out. The tax you would pay when selling (the no-payout strategy pays it then, on a bigger gain), fund or purchase fees, international double taxation and years when the dividend is cut. The tax effect grows with a higher dividend yield and a longer horizon.
This is an exercise based on your assumptions, not a recommendation.
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