EditText based off of Cyril Mottier's G+ Post https://plus.google.com/118417777153109946393/posts/D2bLxYDtAsu uses TintEditText for tint support.

DisclosePasswordEditText.java

import android.content.Context;
import android.graphics.drawable.Drawable;
import android.support.v7.internal.widget.TintEditText;
import android.util.AttributeSet;
import android.view.MotionEvent;
import android.view.View;
import android.view.View.OnTouchListener;
import android.view.inputmethod.EditorInfo;

/**
 * Copyright 2015 John Hogan
 *
 * Licensed under the Apache License, Version 2.0 (the "License");
 * you may not use this file except in compliance with the License.
 * You may obtain a copy of the License at
 *
 *     http://www.apache.org/licenses/LICENSE-2.0
 *
 * Unless required by applicable law or agreed to in writing, software
 * distributed under the License is distributed on an "AS IS" BASIS,
 * WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
 * See the License for the specific language governing permissions and
 * limitations under the License.
 */

/**
 * Based off Cyril Mottier's G+ Post https://plus.google.com/118417777153109946393/posts/D2bLxYDtAsu
 *
 * To change visibility icon, set
 *
 * <pre>
 * android:drawableRight="@drawable/custom_icon"
 * </pre>
 */
public class DisclosePasswordEditText extends TintEditText implements OnTouchListener {

  private Drawable xD;
  private int mPreviousInputType;
  private boolean mIsShowingPassword = false;

  public DisclosePasswordEditText(Context context) {
    super(context);
    init();
  }

  public DisclosePasswordEditText(Context context, AttributeSet attrs) {
    super(context, attrs);
    init();
  }

  public DisclosePasswordEditText(Context context, AttributeSet attrs, int defStyle) {
    super(context, attrs, defStyle);
    init();
  }

  @Override
  public boolean onTouch(View v, MotionEvent event) {
    if (getCompoundDrawables()[2] != null) {
      boolean tappedX = event.getX() > (getWidth() - getPaddingRight() - xD
          .getIntrinsicWidth());
      if (tappedX) {
        final int action = event.getAction();
        switch (action) {
          case MotionEvent.ACTION_DOWN:
            mPreviousInputType = getInputType();
            mIsShowingPassword = true;
            setInputType(
                EditorInfo.TYPE_CLASS_TEXT | EditorInfo.TYPE_TEXT_VARIATION_VISIBLE_PASSWORD, true);
            break;

          case MotionEvent.ACTION_UP:
          case MotionEvent.ACTION_CANCEL:
            mIsShowingPassword = false;
            setInputType(mPreviousInputType, true);
            mPreviousInputType = -1;
            break;
        }
        return false;
      }
    }
    return false;
  }

  private void setInputType(int inputType, boolean keepState) {
    int selectionStart = -1;
    int selectionEnd = -1;
    if (keepState) {
      selectionStart = getSelectionStart();
      selectionEnd = getSelectionEnd();
    }
    setInputType(inputType);
    if (keepState) {
      setSelection(selectionStart, selectionEnd);
    }
    updateDisclosePasswordDrawable();
  }

  private void init() {
    xD = getCompoundDrawables()[2];
    if (xD == null) {
      xD = getResources().getDrawable(android.R.drawable.ic_menu_view);
    }
    xD.setBounds(0, 0, xD.getIntrinsicWidth(), xD.getIntrinsicHeight());
    setCompoundDrawables(getCompoundDrawables()[0],
        getCompoundDrawables()[1], xD, getCompoundDrawables()[3]);
    setOnTouchListener(this);
  }

  protected void updateDisclosePasswordDrawable() {
    xD.setAlpha(mIsShowingPassword ? 145 : 255);
  }
}