Compound interest, no dividends, no share price change
I've read about compounding and understand dividend reinvestment, but still not sure about compounding on stocks with no dividends.
Is this scenario correct?
Share purchase price = $ 10.00
$ 0 dividend stock
Share sell price one year later = $ 10.00
Profit = $ 0.00
I hear statements like "a stock returns 7 % annually and with compounding interest your investment is worth x dollars."
But, if a buy a stock and it is 7% higher at some point later, wouldn't I just make a flat 7% on the original principal?
0 investment, sell at anypoint in the future, and make $ 107.00?
Even if it is 30 years later?
(1)1 Comments
Sorted by latest first Latest Oldest Best
It's a small detail but if you reinvest dividends, you get compound growth not compound interest. The compounding comes from share price appreciation (growth). An infrequent exception would be a stock that pays a blend of interest and dividends.
If there is no dividend, there is no compounding. If share price appreciates, you achieve growth (no compounding).
There are a number of DRIP calculators available. When there's a dividend, there will be two displays, one with dividends reinvested and one without. If there is no dividend, there is only one display and it will be growth of X dollars and associated stats.
Terms of Use Privacy policy Contact About Cancellation policy © freshhoot.com2026 All Rights reserved.