Yet another special case presents itself. My previous concerns about using a DRIP feature on stocks which are either a) too expensive, b) too high yielding, or c) too volatile, still hold true. An exception to my concerns involves stocks which pay dividends every month, instead of every quarter.
This helps reduce my concerns on all 3 counts. The monthly payout means that I can respond more quickly and with less risk of overpaying if a stock quickly gains in price - any overpayment will be on 1/3 of the dividend income compared to a typical stock on a quarterly dividend schedule. Similarly the monthly frequency makes it easier to occasionally turn DRIP on or off if I want to contribute somewhat less of the income toward reinvesting that particular stock, as opposed to going into the general pool for any and all stocks. Finally the volatility problems that could cause that one day when the DRIP purchase occurs each quarter are greatly reduced then it is instead 3 smaller purchases over the same time period.
So the bottom line is that for Realty Income (NYSE:O), a stock I recently purchased, where I would not have set it up for DRIP if it paid a quarterly dividend, I will do so since it pays a monthly dividend.
I would go so far as to say that more dividend companies should consider moving to monthly dividend schedules. This would benefit their shareholders and their stock prices by encouraging more shareholder repurchasing from the dividend than they are seeing now.
Disclosure: I am long O.