How many stocks will I own in n years if I reinvest my dividends?
Your example shows a 4% dividend.  If we assume the stock continues to yield 4%, the math drops to something simple. Rule of 72 says your shares will double in 18 years. So in 18 years, 1000 shares will be 2000, at whatever price it's trading.  Shares X (1.04)^N years = shares after N years. This is as good an oversimplification as any. This answer contains three assumptions: New Share Price: Old Share Price * 1.0125 Quarterly Dividend: (New Share Price*0.01) * # of Shares in Previous Quarter Number of Shares: Shares from Previous Quarter + Quarterly Dividend/New Share Price For example, starting from right after Quarter One: New share price: $20 * 1.0125 = 20.25  1000 shares @ $20.25 a share yields $20.25 * 0.01 * 1000 = $202.5 dividend New shares: $202.5/20.25 = 10 shares Quarter Two: New share price: $20.503 1010 shares @ 20.503 yields $20.503*0.01*1010 = $207.082 dividend New shares: $207.082/20.503 = 10.1 shares Repeat over many cycles: 8 Quarters (2 years): 1061.52 shares @ $21.548 a share 20 Quarters (5 years): 1196.15 shares @ $25.012 a share 40 Quarters (10 years): 1459.53 shares @ $32.066 a share Graphically this looks like this:  It's late enough someone may want to check my math ;). But I'd also assert that a 5% growth rate and a 4% dividend rate is pretty optimistic.
Ok you're looking at this in a very confusing way. First, as said by CapitalNumb3rs, the dividend yield is the dividends paid in the year as a percent of the stock price. Given this fact then if the stock price moves down and the dividend stays the same then the yield increases. Company's don't usually pay out on a yield basis, that's mostly just a calculation to measure how strong a dividend is. This could mean either A. The stock is underpriced and will rise which will lower the yield to a more normal level or B. the company is not doing as well and eventually the dividends will decrease to a point where the yield again looks more normal.   Second off let's look at it in a more realistic way that still takes into account your assumptions:  **YEAR 1** 1. Instead of assuming buying 35% let's put this into a share amount. Let's say there are 1,000,000 shares so you just bought 350k shares for $700k. You paid a price of $2/share. Let's assume the market decides that's a fair price and it stays that way through the end of year 1. This gives us a market capitalization of $2 million.  2. The dividend paid out at year 1 is $60k so you could calculate on a per share basis which would be a dividend of $60k / 1 million shares or a $0.06 dividend per share. Our stock price is still at $2.00 so our yield comes out to $0.06 / $2.00 or 3.0%  **YEAR 2** Assuming no additional shares issued there are still a total of 1 million shares outstanding. You owned 350k and now want to purchase another 50k (5% of outstanding share float). The market price you are able to purchase the 50k shares at has now changed which means that share price is now valued at $1.50 / share. We have a dividend paid out at $100k, which comes out to a dividend per share of $0.10. We have a share value of $1.50 and the $0.10 dividend per share giving us a new yield of 6.66%.   **CONCLUSION:** There are many factors that can cause a company's stock price to fluctuate, some of it is hype based but some of it is a result of material changes. In your case the stock went down 25%. In most scenarios where a stock would have that much decline it would likely either not have been paying a dividend in the first place or would maybe not be paying one for much longer. Most companies that pay dividends are larger and more mature companies with a steady, healthy and predictable cash flow. Also most companies that are that size would not trade a stock under $3.00, I know this is just an example but the scenario is definitely a bit extreme in terms of the price drop and dividend increase. Again the yield is just a calculation that depends on the dividend that is usually planned in advance and the stock price that can fluctuate for many reasons. I hope this made everything more clear and let me know if you have any other questions. "There are some useful answers here, but I don't think any of them are quite sufficient.  Yes, there are some risks involved in CFD trading, but I will try and give you information so you can make your own decision. Firstly, Cyprus is part of the EU, which gives it a level of credibility.  I'm not saying it's the safest or most well regulated market in the world, but that in itself would not particularly scare me away.  The far more important issue here is the risk of using CFDs and of eToro themselves. A Contract for Difference is really just a specialization of an Equity Swap.  It is in no way like owning a real stock.  When you purchase shares of a company you own a real Asset and are usually entitled to dividends and voting rights.  With a CFD, what you own is one side of a Swap contract.  You have a legal agreement between yourself and eToro to ""swap"" the return earned on the underlying stock for whatever fees eToro decide to charge.  As already mentioned, CFDs are not available to US citizens. Equity swaps have many benefits in financial markets.  They can allow access to restricted markets by entering into swaps with banks that have the necessary licenses to trade in places like China.  Many ""synthetic"" ETFs use them in Europe as a way to minimize tracking error as the return is guaranteed by the swap counterparty (for a charge). They also come with one signficant risk: counterparty credit risk.  When trading with eToro, for as long as your position is open, you are at risk of eToro going bankrupt.  If eToro failed, you do not actually own any stocks, you only own swap contracts which are going to be worthless if eToro ceased to exist. CFDs also have an ongoing cost to maintain the open position.  This makes them less suitable for buy and hold strategies as those ongoing costs will eat into your returns.  It's also not clear whether you would receive any dividends paid by the stock, which make up a significant proportion of returns for buy and hold investors.  eToro's website is fairly non-committal: eToro intends to offer a financial compensation representing the dividends which will be allocated on stocks, to the extent such dividends shall be available to eToro. All of these points expose what CFDs are really for - speculating on the stock market, or as I like to call it: gambling.  If you want to invest in stocks for the long term, CFDs are a bad idea - they have high ongoing costs and the counterparty risk becomes significant.  Wait until you have enough money and then buy the real thing.  Alternatively, consider mutual funds which will allow you to purchase partial shares and will ensure your investment is better diversified across a large number of stocks.  If however, you want to gamble and only keep your position open for a short time, these issues may not be of concern to you. There's nothing wrong with gambling, it can be fun, many people gamble in casinos or on football matches - but bear in mind that's what CFDs are for.  CFDs were in fact originally created for the UK market as a way to avoid paying capital gains tax when making short term speculative trades.  However, if you are going to gamble, make sure you're not putting any more than 1% of your net worth at risk (0.1% may be a better target). There are a few other ways to take a position on stocks using less money than the share price: Fortunately, eToro do not allow leveraged purchase of stocks so you're reasonably safe on this point.  They claim this is because of their 'responsible trading policy', although I find that somewhat questionable coming from a broker that offers 400:1 leverage on FX pairs. One final word on eToro's ""social trading"" feature.  A few years ago I was in a casino playing Blackjack.  I know nothing about Blackjack, but through sheer luck of the draw I managed to treble my money in a very small amount of time.  Seeing this, a person behind me started ""following"" me by putting his chips down on my seat.  Needless to say, I lost everything, but amazingly the person behind me got quite annoyed and started criticizing my strategy.  The idea of following other people's trades just because they've been lucky in the past sounds entirely foolish to me.  Remember the warning on every mutual fund: Past performance does not guarantee future returns" "The dividend reinvestment won't change whether the dividends themselves are qualified or not for US income tax purposes.  It's still the holding period on the stock that matters.  If you bought stock in different lots, then you could have a situation where some of the dividends paid are qualified and some are not, but: For completeness, it's worth noting that some dividends cannot be ""qualified"" no matter how long you hold them, but if you've got an investment in a common corporate stock (vs. something more ""exotic""), then what's above should apply." 1) Don't trade individual stocks. You expose yourself to unnecessary risk. 2) Pick a fund with low expenses that pays a dividend. Reinvest the dividend back into the fund.  To quote Einstein: The greatest power on earth is compound interest.  Something is wrong with the software of the site. It will not allow me to answer mark with another comment. So I have to edit this answer to be able to answer him.  @mark No, I am not hoping the price will go up. The price is only relevant in comparison to the dividend. It is the dividend that is important, not the price. The price is irrelevant if you never sell. Dividend paying securities are what you buy and hold. Then you reinvest the dividend and buy more of the security. As I am buying the security with the dividend I am actually pleasantly surprised when the price goes down. When the price goes down, but the dividend remains the same, I am able to buy more shares of the security withwith that dividend. So if the price goes down, and the dividend remains the same, it is a good thing.  Again, the site will not allow me to add another comment. @mark I profit from my investment, without selling, by receiving the dividend. I used to be a speculator, trying to get ahead of the market by 'buy low, sell high' but all that did was make money for the broker. I lost as much as I gained trying to do that. The broker made money on each transaction, regardless if I did or not. It took me decades to learn the lesson that 'buy and hold' of dividend paying securities is the way to go. Don't make my mistake. I now get, at least, 5.5% yeald on my investment (look at PGF, which forms the backbone of my investments). That is almost 0.5% per month. Each month that dividend is reinvested into PGF, with no commission. You can't beat that with a stick. Wow I love some of these answers. Remember why you are investing in the first place.  For me I like Dividend stocks and Dividend Capturing. Here is why. With over 3500 dividend stock companies paying out dividends this year, that means I can get a dividend check almost every day. What about if the stock goes down you ask? Well out of these 3500 companies there is a small group of these stocks that have consistently increased their dividend payout to their investors for over 25 years and a smaller group that have been increasing every year their pay outs for over 50 years. Yes Kennedy was in office back then and to this day they consistently pay higher and higher dividend payments to their investors, every year... for 50 years.  As for the Dividend Capturing strategy, that allows me to collect up 10-20 checks per month with that little effort. As for the stock going down... Here is a little tidbit that most buyers overlook. Stock price is more or less the public's perception of the value of a certain company. Earnings, balance sheet, cash flow, market cap and a few other things in the quarterly report will give you a better answer to the value of a company. If stock price goes down while earning and market go keep going up... what does that tell you? If you just want to know total return, either as dollars or a percentage, just add up the total amount spent on buys and compare this to current value plus money received on sales. In this case, you spent (310 x $3.15 + $19.95) + (277 x $3.54 + $19.95). So your total investment is ... calculator please ... $1996.98. You received 200 x $4.75 on the sale minus the $19.95 = $930.05. The present value of your remaining shares is 387 x $6.06 = $2345.22. So you have realized plus unrealized value of $2345.22 + $930.05 = $3275.27. Assuming I didn't mix up numbers or make an arithmetic mistake, your dollar gain is $3275.27 - $1996.98 = $1278.29, which comes to 1278.29 / 1996.98 = 64%. If you want to know percentage gain as an annual rate, we'd have to know buy and sell dates, and with multiple buys and sells the calculation gets messier. The reinvestment of dividends and capital gains is a very significant portion of investment gains over the years. This creates a compounding effect on your gains. You should almost certainly reinvest to help the account grow, until you are retired and want to withdraw some cash. Placing them in a money market account just builds a pile of uninvested cash. Instead of buying in bulk, I invest the money in equity mutual funds, for an expected return of 12%, which is more than inflation. So, I make more returns. But at the cost of a slight risk, which I'm comfortable with.