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Where I would invest my Westpac Banking Corp (ASX:WBC) dividends

On Wednesday shareholders of Westpac Banking Corp (ASX: WBC), myself included, should have received the banking giant’s interim dividend of 94 cents per share in their nominated accounts.

While some shareholders may use this dividend as a source of income or make use of Westpac’s dividend reinvestment plan, others will no doubt look to reinvest these funds back into the market.

Here are three top shares that I would consider buying with these funds:

Baby Bunting Group Ltd (ASX: BBN)

I think that this baby products retailer could be a good option for investors looking for value and income. Baby Bunting’s shares have fallen heavily over the last 12 months due to being a victim of its own success. The closure of many competitors has led to its margins being hit as it competes against heightened clearance sales. But every cloud has a silver lining. The lack of competition should put Baby Bunting in a position to increase its market share and give it better negotiating power with suppliers next year. As a result, I expect it to bounce back strongly in FY 2019. At present Baby Bunting’s shares provide a trailing fully franked 4.9% dividend.

CSL Limited (ASX: CSL)

One of my favourite growth shares on the Australian share market would have to be this leading biotherapeutics company. It may have been one of the best performers on the market in FY 2018, but a recent note out of Goldman Sachs implies that it could repeat this feat in the new financial year. Goldman initiated coverage on CSL with a buy rating and $231.00 price target earlier this week. I agree with the broker and feel it is well-positioned to deliver strong profit growth over the next few years due to the quality of its core operations, its strong pipeline of new products, and its fledgling influenza business.

NEXTDC Ltd (ASX: NXT)

While this data centre operator may be a little high on the risk scale for the typical bank shareholder, I do think it could be a great long-term buy and hold investment if your risk profile allows it. The shift to the cloud has continued to accelerate this year and shows little signs of slowing. I expect this will lead to NEXTDC experiencing heightened demand for its data centres over the coming years, allowing it to deliver bumper profit growth. But with its shares trading on a sky high earnings multiple, failure to live up to the high expectations of the market could lead to a meaningful share price decline.

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Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited and Westpac Banking. The Motley Fool Australia has no position in any of the stocks mentioned. 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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