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How I’d invest $10,000 into dividend shares today

The market is now well down from its highs earlier in the year. That doesn’t worry me, because lower prices mean higher dividend yields. The following companies look attractive at today’s prices and offer an attractive income stream.

$5000 – Accent Group Ltd  (ASX: AX1)

This company owns a number of footwear businesses, focusing on the growing active and lifestyle segments. It has distribution rights for a number of brands, including Skechers and Platypus.

Accent has been gaining traction with its online offering, with sales more than doubling in FY18. The company opened 31 stores last year and plans to open another 30 in FY19, bringing the total to over 470.

Accent shares are down almost 40% from their high, despite earnings and dividends continuing to grow. In fact, over the last 5 years, earnings and dividends have grown by 13.8% per annum and 11% per annum, respectively. Today Accent trades on around 13 times earnings, and a gross dividend yield of 9%, including franking credits.

$5000 – Carsales.com Ltd  (ASX: CAR)

Despite shares being down around 30% from their highs, the online car classifieds business is still performing well. Earnings and dividends have been growing steadily at around 9% per annum, over the last 5 years.

Carsales may be able to keep that growth rate up with its now 100% ownership of SK Encar (the South Korean version of Carsales.com) and its Latin American business. Both offer access to large populations, which could prove very rewarding if the company can manage to gain traction in these markets.

With a bit of luck, Carsales may be able to develop the same network effect that it has in Australia, that sees more people use Carsales, simply because so many other people are using Carsales. The company continues to dominate in Australia because of the network effect, much like REA Group Limited (ASX: REA) and SEEK Limited (ASX: SEK) dominate their respective niches.

Carsales shares look good value right now, trading on only around 21 times earnings. Carsales trades on a dividend yield of 5.5%, including franking credits.

Foolish takeaway

Buying both of these companies would offer a reliable yield of 7% including franking and offer solid growth prospects over the next few years. If you’re looking for another growing company with juicy dividends, check out the free report below.

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Motley Fool contributor Dave Gow owns shares of Accent Group, carsales.com Limited, REA Group Limited, and SEEK Limited. The Motley Fool Australia has recommended Accent Group, carsales.com Limited, REA Group Limited, and SEEK 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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