Booyah Breakdown: Good to the Last DRIP

Take note: Even though you're no longer getting those checks in the mail, those reinvested distributions are still taxable income to you. You can't escape Uncle Sam.

Reinvesting your dividends can make a huge difference in the amount of shares you hold over the long haul. "You could end up with as many as two or three times as many shares as you started with," says Bob O'Hara, vice president of development at BetterInvesting, a nonprofit long-term investing advocacy group.

Here's the bigger upside: Since you're buying the shares directly from the company, there are no broker fees for the purchase. Yippee! And you usually only need to own one share of a company's stock to be a part of its DRIP. That's why everyone should start giving little kids shares of stock for special occasions.

My stepbrother gave my daughter a few shares of Coca-Cola (SLB Quote) when she was a baby. I reinvest the dividends for her and, although she's only 2 1/2, she's got quite a little portfolio. Brilliant.

But my precious little girl is not the only one benefiting from these DRIP plans. Clearly, there must be perks to the companies that offer these plans as well. Of course, to start, they have immediate access to your money. When you buy a share on the open market, you're essentially buying it from another seller. With a DRIP, you purchase right from the company so your money is immediately in their hands.