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Where I would reinvest my dividends

On Friday three popular income shares will pay their respective shareholders their latest dividends.

These are pharmacy chain operator and distributor Australian Pharmaceutical Industries Ltd (ASX: API), computer hardware and software distributor Dicker Data Ltd (ASX: DDR), and fund manager Janus Henderson Group (ASX: JHG).

While some shareholders may take advantage of dividend reinvestment plans or use the funds as a source of income, many will no doubt look to reinvest the funds elsewhere.

Here is where I would reinvest these dividends:

NEXTDC Ltd (ASX: NXT)

Investors that are looking to make a long-term buy and hold investment might want to consider this data centre operator. Although its shares are certainly high on the risk scale, I believe the seismic shift to cloud computing and its world class data centres has put NEXTDC in a position to grow at a strong rate for the foreseeable future and justify its lofty valuation. However, it is worth remembering that its shares could come under pressure if it fails to deliver on the market’s high expectations.

Sydney Airport Holdings Pty Ltd (ASX: SYD)

Investors in search of more dividends might want to consider this airport operator. At present Sydney Airport’s shares provide a trailing unfranked 5% distribution yield. I believe that this distribution could grow at an above-average rate in the future thanks to the inbound and outbound tourism boom Australia is experiencing. I expect the growing number of passengers passing through its gates will lead to more revenue being generated from fees, car parking, and rents from its retail facilities.

Webjet Limited (ASX: WEB)

With more and more Australians traveling overseas, I believe that online travel agents like Webjet will benefit greatly. Especially given how consumers continue to snub traditional bricks and mortar travel agents and book their travel tickets and hotels online instead. These favourable tailwinds and the growing popularity of its numerous platforms led Webjet to report an impressive 45% increase in half-year net profit after tax earlier this year. I remain confident there will be more strong growth in the second half and in FY 2019.

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Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited and Sydney Airport Holdings Limited. The Motley Fool Australia has recommended Webjet Ltd. 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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