DRP is a good way to get a compounding effect on a share...

DRP is a good way to get a compounding effect on a share investment, similar to compounding interest on an bank account. It's a valuable thing to do if the dividend is being paid by a stock that is the best place you could put your money. If that's the case then DRP is better than using your dividend to buy on market because...

1. No brokerage
2. DRP shares are priced at VWAP so you don't get skewered by a spike
3. Big players often push the price down a bit during VWAP week to get more DRP shares, so you would as well
4. DRP shares are sometimes priced at a discount, which improves the ROI on the purchase

The downside is that by ploughing your dividends back into a stock you're exposing cash income to capital losses.