A DRIP can be run by the broker, which simply buys shares on the payment-date, or by the company through its transfer-agent, which may issue new stock at a small discount to market. Broker plans buy fractional-shares so no cash is left idle.
Two catches. Reinvested dividends are still taxable in a taxable account in most jurisdictions, and each reinvestment creates a new cost-basis lot, which makes records messy and can trigger a wash-sale-rule problem if you also sell at a loss nearby.
Example: 500 shares paying $0.60 produce $300. At $48 a share the plan buys 6.25 shares. After ten such quarters at similar prices the holding is about 565 shares, and each purchase is a separate tax lot.
Related: payment-date