How I’d generate a $10,000 second income from CSL shares

One of the most popular shares on the ASX 200 is CSL Limited (ASX: CSL).

The biotherapeutics company is found in countless investor portfolios across the country.

And if you don’t own it directly, you’re probably holding it indirectly in your superannuation fund.

Why CSL shares are popular

CSL, which was previously known as the Commonwealth Serum Laboratories, was established in Australia all the way back in 1916.

It certainly has come a long way since then. Over the last century, CSL has become one of the leading biotherapeutics companies in world.

It now comprises CSL Behring, a global leader in rare and serious diseases; CSL Seqirus, one of the largest influenza vaccine providers in the world; CSL Plasma, the world’s largest plasma collection company; and CSL Vifor, a leader in iron deficiency and nephrology.

Since listing on the Australian share market back in 1994, CSL shares have generated big returns for investors. This has continued over the last decade, with the company’s shares outperforming the market with an average total return of 18.96% per annum.

This means that a $10,000 investment in 2013 would now be worth almost $57,000.

CSL has also rewarded its shareholders with a growing stream of dividends over the years.

With that in mind, let’s take a look to see what it would take to generate $10,000 of passive income from CSL shares.

A $10,000 passive income

According to a note out of Goldman Sachs, its analysts are expecting a dividend of US$2.39 (A$3.46) per share in FY 2023.

Based on the latest CSL share price of $303.56, this equates to a modest 1.15% dividend yield.

Clearly, with a yield as slim as that, $10,000 is going to take a significant investment. In fact, you’re looking at an investment of close to $900,000 to be able to generate that level of income in FY 2023.

It’s not hard to argue that there are probably more efficient investment options out there if you’re looking for income.

But that doesn’t mean you should completely discount CSL.

That’s because it is a prime example of a company that rewards you the longer you hold onto its shares.

For example, if you were lucky enough to buy CSL shares 20 years ago when they were fetching $15.00. Your yield on cost (yield on the price you paid for the shares) would be a massive 23%.

That means that a $45,000 investment back in 2003 would provide dividend income of just over $10,000 in 2023.

Whether CSL can grow the same amount over the next 20 years is debatable given its size now. But the key takeaway from this example is that investing in high quality companies with strong long term growth outlooks has the potential to generate big dividends in the future.

The post How I’d generate a $10,000 second income from CSL shares appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in CSL. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://www.fool.com.au/2023/02/13/how-id-generate-a-10000-second-income-from-csl-shares/