Cash goes in, cash comes out, right? Businesses that generate free cash flow, or those that eventually will, are what every investor should seek. The problem is that not all shareholders need the cash coming out, usually as dividends. That is where dividend reinvestment plans (DRPs) come in. The idea is that, instead of a dividend - cash coming out - the company issues you additional shares to an equivalent value. The question is whether they are worth it.
There are a few considerations. The first is whether the stock itself is underpriced, one of the golden rules of investing. If so, it may make sense to participate, especially as DRPs often offer stock at a small discount to the traded price and avoid broker commissions. To decide, keep an eye on your DRPs at dividend time and make judgments about the value on offer.