How the DRIP ledger accounts for every cash flow
Understand event ordering, contributions, tax, fees and residual cash.
One event at a time
The opening share count earns the event dividend. Entered withholding is deducted. The selected share of that net distribution joins the contribution budget and any previous purchase residual. Only then are shares bought at the event price. Those new shares cannot earn the same dividend a second time.
Keep the money categories separate
External contributions are money added from outside. Reinvested dividends are money already generated inside the holding. Counting reinvestment as an external contribution would misstate both invested capital and gain. Deliberately retained dividend cash remains separate from the purchase pool and earns no interest in this model.
Whole shares and fees
Ten shares paying an annual 3 each generate 30. At a 100 share price, whole-share mode cannot buy another share and retains the 30 as residual cash. A purchase fee is charged only when a purchase actually executes. Retained residuals can be used in later events.
Use a comparable baseline
The cash-dividend comparison uses the same initial shares, price assumptions and external contributions. It still invests external contributions; it simply does not reinvest dividend income. Ending wealth includes the cash balance in both cases.