Where I would reinvest my Telstra Corporation Ltd (ASX:TLS) dividends

This morning Telstra Corporation Ltd (ASX: TLS) shares will go ex-dividend for the telco giant’s fully franked final dividend of 11 cents per share. This dividend will then be paid to eligible shareholders on September 27.

While some shareholders will use this dividend as a source of income to live from, others may wish to reinvest it back into the share market.

Here’s where I would reinvest these funds:

A2 Milk Company Ltd (ASX: A2M)

I thought that a2 Milk Company’s full year results release earlier this month was one of earnings season’s strongest. For the 12 months ended June 30, a2 Milk reported total revenue of NZ$922.7 million and a net profit after tax of NZ$195.7 million. This was an increase of 68% and 116%, respectively, on the prior corresponding period.

While this level of growth is likely to moderate over the coming years, I still believe the company can continue growing at a strong enough rate to justify its shares trading at a premium to the market average. Especially given its relatively small slice of the massive Chinese infant formula market and its growing brand awareness in the region. This should be supported by its expansion into new territories.

CSL Limited (ASX: CSL)

Another top result during earnings season came from this global biotech company. CSL posted a 15% increase in revenue to US$7.6 billion and a 29% jump in net profit after tax to US$1.73 billion. Strong performances from the company’s Immunoglobulins and Specialty businesses were key drivers of the impressive result.

The good news is that these businesses look set to continue their strong form in FY 2019, putting CSL in a position to potentially outperform once again. While its shares are not cheap, I believe it deservedly trades at a premium to the market average and would be a quality long-term buy and hold investment.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of A2 Milk. 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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