DRIP Buffer
The DRIP Buffer is the margin between the dividend income your shares generate each payment cycle and the minimum amount required to purchase at least one additional share through DRIP reinvestment. When this buffer is wide, your DRIP is secure. When it narrows — due to rising share prices or a dividend cut — reinvestment is at risk of breaking. A healthy DRIP Buffer is the foundation of sustainable compounding.
How Prospyr uses it
In the DRIP Engine Simulator, the DRIP Buffer is calculated automatically from your share count, dividend per share, and current share price. The simulator shows your buffer in concrete terms — how many full dividend cycles your DRIP can sustain before it breaks — and flags when Price Creep is eroding it. In Phase 2, the Coverage Ratio System will use your buffer level to assign a status: Fortress (≥1.15), Defended (≥1.10), At Risk (<1.10), or Broken (<1.00). Any holding with a narrowing buffer will trigger a Price Creep Alert. The DRIP Buffer is the number that tells you whether your compounding engine is healthy or quietly failing.
Why this matters for Canadian investors
Most Canadian discount brokers — including Questrade and Wealthsimple — do not support fractional DRIP shares. Your dividend income must cover the full share price to trigger reinvestment. This makes the DRIP Buffer a hard threshold, not a soft guideline. A stock that has risen significantly in price while holding its dividend flat has quietly reduced your buffer, and most investors do not notice until reinvestment stops appearing on their statement.