3 reasons to own CSL Limited shares

Just over 12 months ago investors were busily discussing which of the following three shares – CSL Limited (ASX: CSL), Commonwealth Bank of Australia (ASX: CBA) and Macquarie Group Ltd (ASX: MQG) –  would be first to break through the $100 a share price barrier.

While CSL was ultimately the “winner” in that race, arguably of more interest and importance has been the recent share price performance of all three.

In the past 52 weeks, CSL’s share price has produced a gain of 5% (and remains above the $100 a share mark), Commonwealth Bank has declined by 23%, while Macquarie Group is down 22%.

In comparison, the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has fallen 17%.

The performance of CSL is a reminder of what makes a truly defensive business model; one that isn’t beholden to consumer spending patterns, APRA regulations or the housing market!

Here are three reasons to stick with your CSL shares…

  1. A full price but not excessive – CSL is trading on a trailing price-to-earnings multiple of around 27 times. That’s certainly not “cheap” by conventional standards, but considering the earnings growth expected over the next few years and the quality of the group’s businesses it is arguably a reasonable price.
  2. Shareholder oriented Board – The Board of CSL has implemented numerous on-market share buybacks in recent years. These actions have boosted earnings per share to remaining shareholders. The Board has also ensured that excess funds are returned to shareholders through dividends. The recently declared interim dividend of 81.5 cents per share (cps) was a substantial increase on the 74.4 cps in the prior corresponding period.
  3. Market leader with competitive advantages – CSL operates businesses which are not easy to replicate and which would cost enormous investment to compete against. Through both organic and acquisitive growth, CSL has grown in scale to become a global leader in numerous health care areas including influenza vaccine, an entrenched position which would be hard to topple.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. 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 Bruce Jackson.

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