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How I’d invest $3,000 into dividend shares

Credit: Simon Cunningham

The income you can get by leaving money in the bank is pretty bad these days. It’s crazy to think that with a million dollars in the bank the most you might be able to get is $30,000, with most accounts offering less of a return than that.

So, what should an income-seeking investor do?

I think Australian shares are the answer. Many experts agree that, on the income side of things, Australian investments are hard to match for the income they can produce.

If I were investing $3,000 into dividend shares today, this is what I’d pick:

WAM Research Limited (ASX: WAX)

WAM Research is the best listed investment company operated by Wilson Asset Management in my opinion. It has just gone ex-dividend, which has sent the share price down from $1.58 to $1.52. This represents better value and a higher dividend yield for potential investors.

The LIC has outperformed the ASX over the past five years and it pays a growing dividend yield out from its impressive investment returns. It currently has a grossed-up dividend yield of 8.67%.

Greencross Limited (ASX: GXL)

Greencross is Australia’s largest pet company with its clever strategy of owning the Greencross vet network and the Petbarn retail network. The company is experiencing like-for-like revenue growth across the board and is also delivering high single-digit profit growth.

The company has grown its dividend each year since 2009 and increased it by 5% in its latest half-year report. It currently has a grossed-up dividend yield of 5.22%.

NAOS Absolute Opportunities Co Ltd (ASX: NAC)

This Naos LIC generally invests in shares with market capitalisations of under $1 billion that usually operate as industrial businesses.

It makes long-term investments with at least a three to five year investment horizon, which gives the best chance for its investments to work out and is why it has been one of the better performing LICs for shareholders over the past three years.

It currently has a grossed-up dividend yield of 7.5%.

Foolish takeaway

I like all three of these dividend ideas, which is why I’m invested in two of them. At the current prices I think Greencross is the best option because it’s only trading at around 14x FY18’s earnings and is expected to continue growing over the next few years.

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Motley Fool contributor Tristan Harrison owns shares of Greencross Limited and WAM Research Limited. The Motley Fool Australia owns shares of and has recommended Greencross Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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