Booyah Breakdown: Good to the Last DRIP

In addition, companies like a solid shareholder base. If you're a DRIP investor, you're pretty committed to the stock. If the market goes down or a negative one-time event happens, you wouldn't be as quick to jump ship as someone who didn't have as much of a vested interest in the place.

Take AFLAC's (AFL Quote) DRIP. With 64% of its shareholders participating, the company's got a ton of loyal shareholders that probably aren't leaving any time soon. "The plan is one of the best around," says O'Hara.

How do you find a DRIP?

There are about 1,600 companies offering DRIPs these days, so first figure out if your company is one of them. Go to the investor relations section of its Web site or check out stock sites like StockSelector.com that list companies with DRIPs.

DRIPs can vary from company to company. Some companies only let you buy new shares based on the amount of dividends you're reinvesting. Others allow you to add some cash and buy more shares. Do some legwork and make sure you understand the plan.

If your company has a DRIP and you want in, you have a few choices. First, you could buy directly through the company. Fill out the paperwork and -- voila! -- you're a DRIP member.

But tracking all those purchases can get onerous. Every time your dividends are reinvested, you'll have a new lot of shares. You'll need to keep a spreadsheet of every purchase, including the share price you paid and the date of purchase, so you know your cost basis when you decide to sell those shares someday.