In a way, it is like reinvesting dividends on a life insurance policy. The dividends are buying more insurance, which is more expensive as you get older, and thus less of a bargain. Better off to take the dividends in cash, or to use them to reduce premiums.
I have used this latter system to create a portfolio of stocks, mostly dividend-paying boring stocks for companies that actually make and sell things and make old-fashioned profits. Every year, enough dividends accumulate to buy yet another (different) stock, again, not a huge holding, but a small one, which is possible in this era of no-fee trades. So I end up with 50 different stocks in one account, and the account is not dependent on any one stock for its value. (I also have some corporate bonds as well in that account). If one company goes South, frankly I don't care, as the amount invested is pretty small.
So for me, reinvesting dividends doesn't make too much sense for most of my holdings. I would rather use that money to buy something else and thus further diversify my account.
Of course, as we get older, you can also take that dividend money out as cash, as a supplement to your retirement income. But like with interest, it is damn hard to live off of dividends, even if you had a million bucks invested.