Dividend Reinvestment Beats Spending the Cash, and the Gap Compounds Fast
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6 min read
Every year, Telkom Indonesia (TLKM) pays its shareholders a cash dividend. Most people either spend that cash or let it sit in their brokerage account. A smaller group does something else: they use it to buy more TLKM shares on the spot, a move called dividend reinvestment. Over five straight payouts, that one habit alone, with no help from the share price going up, grows a starting position by 38%. Here is the real dividend history behind that number, and the arithmetic that makes it work.
A dividend is a cash payment a company sends to shareholders out of its profit, usually once or a few times a year. If you spend it, or just leave it as idle cash, your share count never changes. Dividend reinvestment, sometimes automated by a broker as a DRIP (Dividend Reinvestment Plan), instead uses that cash to buy more shares of the same stock immediately. Those new shares are now yours too, so the next dividend payout is calculated on a bigger share count than before. That is the entire mechanism. There is no trick to it, just cash buying more of the thing that is about to pay you again.
TLKM is a useful stock to test this on because it has paid a cash dividend every year for the past five fiscal years, and every figure below is a real, reported number, not an estimate.
| Fiscal year | Dividend per share | Total cash paid | Paid in |
|---|---|---|---|
| 2020 | Rp168.01 | Rp16.64 trillion (80% of net profit) | 2021 |
| 2021 | Rp149.97 | Rp14.86 trillion (60% of net profit) | 2022 |
| 2022 | Rp167.59 | Rp16.6 trillion | 2023 |
| 2023 | Rp178.50 | Rp17.68 trillion (72% of net profit) | 2024 |
| 2024 | Rp212.46 | Rp21 trillion (89% of net profit) | 2025 |
The share of profit TLKM pays out, its payout ratio, has moved around inside the 60% to 90% range the company has stated as its own policy, and stepped up sharply for the 2024 fiscal year. TLKM closed at Rp2,620 per share on 21 August 2026, putting today's dividend yield, the most recent dividend divided by the share price, at about 8.1% (Rp212.46 ÷ Rp2,620).
Say you owned 1,000 TLKM shares, ten standard lots, at the start of this five-year run. To isolate what reinvestment alone does, separate from whatever the share price happens to do, this example holds the price constant at TLKM's real Rp2,620 close throughout. In real life the price moves every year, and that would add or subtract from the result. The mechanic being shown here, a dividend buying more shares that then earn their own dividend, works the same regardless of price.
Path 1: spend every dividend. Your share count stays at 1,000 for all five years. You collect Rp168,010, then Rp149,970, then Rp167,590, then Rp178,500, then Rp212,460. Total cash in hand: Rp876,530, and you still own exactly 1,000 shares at the end.
Path 2: reinvest every dividend into new TLKM shares at Rp2,620.
| After this year's dividend | Shares owned | That year's dividend |
|---|---|---|
| 2021 (FY2020 div.) | 1,064 | Rp168,010 |
| 2022 (FY2021 div.) | 1,124 | Rp159,568 |
| 2023 (FY2022 div.) | 1,195 | Rp188,371 |
| 2024 (FY2023 div.) | 1,276 | Rp213,308 |
| 2025 (FY2024 div.) | 1,379 | Rp271,099 |
By the fifth payout, your share count has grown from 1,000 to 1,379, a 37.9% increase, without you ever depositing another rupiah. The 2024 fiscal year dividend alone, Rp271,099 on the reinvested path against Rp212,460 on the spend-it path, is 27.6% larger purely because it landed on a bigger pile of shares. Those extra 379 shares are worth about Rp993,180 at TLKM's own current price, on top of the Rp1,000,356 in dividend cash that got put to work along the way.
Notice that the size of the yearly increase in the reinvest column keeps growing: 64 new shares after year one, then 60, then 71, then 81, then 103. That is not TLKM paying a bigger dividend per share every single year, its dividend per share actually dropped in 2021 before recovering. The share count grows faster each year because it is being multiplied by an ever-larger base. This is the same compounding mechanic behind the Rule of 72 shortcut for how fast money doubles: a return applied to a bigger number produces a bigger result, and if that result is reinvested too, the next round starts from an even bigger number again.
This worked example holds TLKM's share price fixed on purpose, to keep the demonstration to one variable: what reinvesting the dividend itself does to your share count. It is not a claim about what an investor who actually held TLKM since 2020 earned in total, since the share price moved up and down across those five years and a real reinvestment plan would have bought shares at a different price each time, sometimes more, sometimes fewer than shown here. It also ignores brokerage fees on each reinvestment purchase and the final withholding tax already deducted from an IDX cash dividend before it reaches an investor's account, both of which reduce the real-world number somewhat. None of that changes the direction of the result, only its exact size.
The same mechanic applies to any dividend-paying stock you hold, not just TLKM. TLKM's own dividend and price history are on its NetWort Asset Detail page, where you can see how the numbers above compare to the stock's actual, unrounded performance. If you are weighing a high dividend yield against a stock's overall performance, dividend yield and total return are not the same measurement, and it is worth knowing the difference before a yield number alone decides anything.