Portfolio growth when dividends are reinvested net of the 20% dividends tax.
Value with reinvestment
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Price growth only
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Reinvestment boost
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Your breakdown
Updates live as you type| Year | Start value | Net dividend reinvested | End value |
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Where the second engine of return comes from
A share portfolio earns money two ways. The price of the shares drifts up over the years, and the companies pay out dividends along the way. If you spend the dividends, only the first engine compounds. If you plough each dividend back in to buy more shares, those new shares then earn their own dividends and their own price growth, and the whole thing snowballs. This calculator runs that snowball year by year so you can see the second engine working. It is built for buy-and-hold investors on the JSE who want to know whether reinvesting is worth the bother, and the honest answer over a long horizon is usually a firm yes.
The South African wrinkle is tax. Before a dividend can be reinvested in a normal brokerage account, the 20 percent dividends withholding tax comes off the top. So if a holding yields R8,000 in dividends, only R6,400 actually goes back to work. The tool models exactly that haircut, reinvesting the after-tax dividend each year. The 20 percent figure is the rate this calculator applies, and you should confirm the prevailing rate with SARS, since it is the kind of number budgets revisit.
Twenty years on a R200,000 holding
Take a R200,000 portfolio with a 4 percent dividend yield and 7 percent annual price growth, left alone for 20 years. Each year the dividend is taxed at the rate this calculator applies, and the remaining 80 percent is reinvested. The first three years look like this.
Carry that forward 20 years and the portfolio reaches about R1.40 million. Had you taken price growth alone and spent every dividend, you would have roughly R773,937. Reinvesting the after-tax dividends adds around R621,344, which is the reinvestment boost the tool reports. The chart contrasts the two paths.
The shelter that removes the 20 percent
The single biggest lever you control is the account the shares sit in. Inside a Tax-Free Savings Account, dividends are not subject to the 20 percent withholding, so the full dividend reinvests and the snowball is bigger. The catch is the contribution ceiling, currently R36,000 a year and R500,000 over a lifetime as modelled across this site, with a stiff penalty on contributions above those limits. A sensible order of operations for many South Africans is to fill the TFSA first with high-yielding holdings, then hold the rest in a normal account where the after-tax reinvestment this calculator shows applies. Confirm the current limits with SARS before you max out, because they have moved over the years.
Does this tool account for capital gains tax when I eventually sell?
No. It projects the growing value while you hold, with dividends taxed at the rate this calculator applies as they are reinvested. When you finally sell in a normal account, a separate capital gains tax applies, with 40 percent of the gain included in your taxable income for an individual. A long reinvestment horizon builds a large unrealised gain, so plan the exit, and reinvesting inside a TFSA sidesteps that gains tax entirely.
Why is the reinvestment boost so much larger than the dividends I put in?
Because each reinvested dividend then earns price growth and further dividends for the rest of the horizon. A R6,400 dividend reinvested in year one is itself worth far more than R6,400 by year 20. The boost is the compounding of all those reinvested amounts, not just their sum, which is why the gap widens sharply in the later years.
Should I use a broker DRIP or reinvest manually?
Either works for the maths here, since the tool assumes the net dividend is fully reinvested. A formal dividend reinvestment plan automates it and often avoids brokerage on the reinvested amount, while manual reinvestment gives you control over which share to buy. The tax treatment, the 20 percent withholding outside a TFSA, is the same either way.