I’m a big advocate of buy and hold investing and believe it is one of the best ways to grow your wealth over the long term.
If you can identify a company which has the potential to grow consistently over a long period of time, you can generate some incredible returns on the share market.
A prime example of this is CSL Limited (ASX: CSL).
CSL, which was previously known as Commonwealth Serum Laboratories, was established in Melbourne in 1916 to service the health needs of a nation isolated by war.
In the years that followed CSL provided Australians with access to 20th century medical advances including insulin and penicillin, and vaccines against influenza, polio and other infectious diseases.
It was incorporated in 1991 and then listed on the Australian share market in 1994 for a stock-split-adjusted price of $0.76 per share. Today its shares are changing hands for a massive $306.97.
This means investors that invested $10,000 into the CSL IPO back in 1994 would have received 13,157 shares for their troubles.
Fast-forward to today and those 13,157 shares have a total value of $4,038,804.29. Yes, you read that correctly, a $10,000 investment is now worth over $4 million today.
Don’t forget the dividends.
But it gets better. Very few people would turn to CSL for dividends. Due to the premium that its shares (deservedly) trade at, CSL’s shares will generally only ever yield a ~1% dividend.
However, if you bought shares at the IPO, you would be counting down the days to its dividend payments each year.
In FY 2020 CSL is expected to pay a dividend of approximately $3.13 per share. This means that those 13,157 shares we acquired at the IPO would generate total dividends of $41,200 this year.
That’s more than four times the original investment and, based on its current trajectory, is only likely to increase over the coming years.
And while not every company will generate as strong returns as this, if you choose wisely and focus on companies with strong business model and positive long term growth prospects, you might just identify a future millionaire maker.
These top five stocks, for example, could be great options for long term investments. Especially after the market crash dragged them notably lower.
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Returns as of 7/4/2020
More reading
- How to become a better investor in just 2 minutes
- 4 top ASX shares to invest $4,000 into immediately
- The smartest ASX shares to buy if you have $2,000
- Why the coronavirus is still affecting share markets
- Is this ASX healthcare share about to soar?
James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. 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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