Take this site’s default scenario: $10,000 invested, $250 a month added, a 3.5% dividend yield, and both the dividend and the share price growing at 5% a year for 20 years. With dividends reinvested, the projection ends at $208,685. Take every dividend as cash instead and it ends at $169,839 — and that figure already includes the pile of cash you collected along the way. One settings toggle, a $38,846 difference.
Nothing magical is happening. A reinvested dividend buys shares, and those shares pay dividends of their own, which buy more shares still. In the early years the loop is barely visible — the first reinvested payouts might buy a few dollars of extra stock a month. The gap opens late, because by then a meaningful share of your position was bought by dividends rather than by you.
That does not make DRIP automatically right. Taking the cash makes sense when you actually need the income — most retirees reinvest during their working years precisely so they can switch the tap on later. Cash also lets you rebalance deliberately, steering payouts into whatever holding is underweight instead of concentrating further in the payer. And in a taxable account, remember that reinvested dividends are taxed in the year they are paid, even though you never touched the money.
The practical approach many investors land on: DRIP on while you are building, cash when you are spending, and a deliberate choice — not a default — in between. Run your own numbers with the toggle in the dividend calculator; the comparison strip under the chart shows both endings side by side.