A couple of weeks ago National Australia Bank Ltd (ASX: NAB) paid out its huge half yearly dividend. Hopefully you haven’t been thinking about your portfolio over the Christmas break, but now you need to decide what do to with your NAB dividend.
Where to invest your NAB dividend
Based on the half yearly dividend payment of 99 cents per share, NAB has a historical fully franked dividend yield of 8.3%. That yield figure doesn’t even include the bonus of franking credits, which sends it up to 11.5%.
Many NAB shareholders are retirees, so it’s quite likely that their dividend was used to pay their living costs or ‘invest’ in things like Christmas presents or a holiday.
If you didn’t spend your dividend straight away, a simple answer could be to re-invest the dividend back into more dividend shares. That could take the stress out of deciding what shares to buy.
However, NAB may not be the best share to buy more shares of. Or even if it is a good one to buy, the price at the time of re-investment may not be the best time to accumulate more shares.
There aren’t many high quality businesses out there that have high dividend yields. Telstra Corporation Ltd (ASX: TLS) used to be a dependable dividend payer year after year. However, is dividend was recently cut and its earnings are not as reliable as before.
Many investors these days are liking the simplicity of low cost exchange traded funds (ETFs) like Vanguard Australian Share ETF (ASX: VAS). This offers diversification and a fully franked dividend yield of 4.5%.
Other investors like the regular cashflow provided by shares like Sydney Airport Holdings Pty Ltd (ASX: SYD) and Transurban Group (ASX: TCL).
I’m more attracted to the idea of buying attractive growth shares that are growing their dividends at a fast rate each year such as Bapcor Ltd (ASX: BAP), MNF Group Ltd (ASX: MNF) and Webjet Limited (ASX: WEB). After many years of growth you could receive a big dividend on your initial investment, along with very healthy capital gains.
Our 3 ‘proven’ ASX dividend shares
Alternatively, the best idea for NAB shareholders could be to simply invest their dividend into some of the most historically reliable businesses on the ASX, like the ones in the free report below.
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