Calculation methodology

What a projection means

A projection is a deterministic illustration, not historical performance or a forecast. Rates remain constant unless you change them. Prices and distributions in actual markets fluctuate. Default values are examples, not recommendations. All amounts are in US dollars.

Monthly timing

The simulation uses whole years with twelve monthly steps each. The initial investment buys fractional shares at the starting price. Recurring contributions arrive at the beginning of each scheduled period and buy at that month’s starting price. Monthly contributions occur each month; quarterly contributions in January, April, July, October; twice yearly in January and July; yearly in January. The amount entered is per occurrence. Contribution growth is applied at each new year.

Price and dividend growth

After contributions, share price and annual dividend per share each grow by a monthly factor of (1 + annual rate)^(1/12). By Dividend / Share uses your entered annual dividend as the authoritative input, including zero. By Yield uses starting annual dividend per share = starting price × starting yield. Switching modes converts the current value; inactive values are derived. Dividend growth and price growth are independent assumptions; yield can change over time.

Payments and reinvestment

Generic dividend payments occur at period end: monthly; March, June, September, December for quarterly; June and December for twice yearly; December for yearly. Gross payment = shares held × that month’s ending annual dividend per share ÷ payments per year. No ex-dividend dates or ownership cutoffs are modeled. New contributions can participate in that period’s payment. Tax is removed first, then the selected reinvestment percentage buys fractional shares at the ending price. The remainder is retained as cash and earns no interest.

Portfolio and income

Portfolio value is shares × share price. It excludes retained cash. Annual income is the ending gross run-rate (shares × annual dividend per share), which differs from dividends actually paid during the year. Monthly equivalent is that run-rate ÷ 12. After-tax income applies the selected flat tax rate. The calendar shows simulated gross payments during the final projection year.

Yield on contributed capital

Yield on contributed capital (the definition of yield on cost used here) = ending annual gross income ÷ (initial investment + recurring external contributions) × 100. Reinvested dividends do not enter that denominator. Zero contributed capital returns zero. This metric is not total return.

Tax and inflation

A single flat dividend tax rate applies to all distributions, whether reinvested or taken as cash. No tax brackets, qualified-dividend treatment, capital-gains tax, fees, or tax-advantaged account rules are modeled. Inflation-adjusted portfolio value = nominal portfolio value ÷ (1 + inflation rate)^years. Inflation does not alter contributions or payouts.

Goal, sensitivity, and stress tools

Required capital = monthly income goal × 12 ÷ [yield × (1 − tax rate)]. A positive goal with zero effective yield is unreachable. Sensitivity changes annual dividend growth by ±2 percentage points, capped to the supported range. High sensitivity means the upper-to-lower monthly-income spread exceeds 100% of the base or starting yield exceeds 10%; moderate means spread exceeds 30%. Labels are illustrative mathematical thresholds, not risk ratings. Stress changes apply from the beginning of the projection, not as a midyear event.

Precision and bounds

Calculations retain fractional shares and unrounded intermediate values using IEEE-754 double precision. Compensated summation reduces accumulated error in running totals. Displays round to whole dollars to avoid implying exact future outcomes; CSV retains calculation precision for inspection. This is projection arithmetic, not brokerage settlement accounting. Supported horizons are 1–60 years; growth ranges are −50% to 30%, yield 0–30%, tax and reinvestment 0–100%.

A reproducible check

With $10,000 initially invested, a 4% yield, quarterly payments, no growth, contributions, or tax, and no DRIP: annual cash dividends are $400 and the portfolio remains $10,000. At 100% DRIP, ending value is $10,000 × 1.01^4 = $10,406.04. At 50% DRIP and 25% dividend tax, ending value is $10,000 × 1.00375^4, about $10,150.85; retained cash equals the amount reinvested.

Authoritative position entry and the optional yield cap

By Amount derives shares as investment ÷ price. By Shares derives investment as shares × price. Fractional shares are retained. Each month the independently grown raw annual dividend is limited, if a cap is enabled, to the lower of raw dividend and current price × maximum yield. The same effective dividend drives payments and ending income. The raw growth path continues independently even when capped. No cap is the default; presets are modeling choices, not sustainable-yield claims.

Return accounting and reinvestment comparison

Portfolio = initial investment + recurring external contributions + reinvested dividends + accumulated share-price gains or losses. Price gains are measured each month as shares held during the price movement × change in price, after contributions and before dividend reinvestment. Gross dividends = taxes + reinvested dividends + retained cash. Retained cash is separate from portfolio value. The automatic DRIP comparison changes only reinvestment, using the same engine. Difference means selected minus alternate; neither scenario is labeled a winner.

Sources and the boundary of this model

These monthly timing conventions, caps, and accounting formulas describe our own deterministic model. They are not prescribed by the sources below.

SEC Investor.gov: Stocks – FAQs explains that dividend reinvestment plans use distributions to buy additional shares and may charge fees. Our model omits fees and actual plan execution rules.

IRS Topic 404: Dividends distinguishes ordinary and qualified dividends. Actual treatment depends on circumstances; our single entered tax rate does not determine tax liability.

Sources reviewed September 27, 2026. No external reviewer or professional endorsement is claimed.