CSL Limited (ASX: CSL) has never had much of a reputation as an ASX dividend share. Especially when compared to its companions in the upper echelons of the S&P/ASX 200 Index (ASX: XJO). Think about it. CSL is now the third-largest ASX 200 share by market capitalisation. Gold and silver go to Commonwealth Bank of Australia (ASX: CBA) and BHP Group Ltd (ASX: BHP). And below CSL are the other 3 remaining big banks.
All of these other companies are (or at least were, pre-COVID) dividend heavyweights.
And yet CSL has never enjoyed such a reputation. Even today, the company offers a trailing dividend yield of 1.04% – not really 'set the world on fire' stuff. And that's not even following a COVID-induced dividend cut from last year. In fact, 2020 saw CSL dole out its highest dividends in history with a combined US$2.02 per share payout. 2021 so far has seen an interim dividend of US$1.04 per share, healthily exceeding 2020's interim dividend of 95 cents.
Image source: Getty Images
CSL's dividend growth
CSL has been around in some form for over a hundred years. But it only paid its first dividends in 2013. That was a combined payment of US$1.02 per share. That means that CSL has grown its annual dividend since 2013 by a compounded annual growth rate of 10.25% per annum.
Here's an interesting number for you. Back in October 2013, when CSL paid its first final dividend, CSL shares were going for roughly $66 apiece. Using today's exchange rate, that would have equated to a rough annual yield of around 2% at the time for an investor who picked up CSL back then. But if that investor held those CSL shares until today, the yield they would have gotten on their original investment would be around 4% today with CSL's dividend growth.
That's the power of a compounding growth rate. If CSL continues to increase its dividends by an average of 10.25% every year, that yield-on-cost will only grow larger, and exponentially so, in the years ahead.
So although a 1.04% trailing dividend yield might look a little paltry, CSL's history of strong dividend growth proves that sometimes it's not just size that matters.
