Booyah Breakdown: Good to the Last DRIP

Cramer loves companies that make dividend distributions -- because as a shareholder, a.k.a. owner in the company, he believes you deserve your piece of the profits. Which is exactly what dividends are.

And now is the season for quarterly dividend announcements. For instance, Legg Mason (LM Quote) declared a regular quarterly dividend of 21 cents per share this week. Schlumberger (SLB Quote) announced a 40% increase in its dividend, up to 17.5 cents per share, last week. And a few weeks ago, Microsoft (MSFT Quote) said it was issuing a quarterly dividend of 10 cents a share.

Dividends are in the air.

But what should you do with those quarterly dividend checks? Cash them and go shopping? As fun as that sounds, it's not doing much for your portfolio. Have you considered a dividend reinvestment plan, a.k.a. a DRIP? Many of you have asked questions about these, so apparently DRIPs are on your mind.

Basically, if you plan on holding a stock for a while, you probably should be a part of the company's dividend reinvestment program. But even if you're an active trader, a DRIP can still be a great way to add shares to your position without extra fees.

So let's dissect the DRIP.

What's a DRIP?

It would be so easy to make an ex-husband joke here -- but I'll restrain myself. Simply put, a dividend reinvestment plan is a way for shareholders to reinvest their dividends back into the company. Instead of getting those dividend checks sent home, the company keeps the money and buys more shares for you.