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Should you buy CSL Limited for its dividend?

The CSL Limited (ASX: CSL) share price is pushing the $200 mark today, but if you’ve been thinking of buying shares in the blood product giant for its growing dividend there are a few things you need to know today.

The first is that shares will go ex-dividend next week on Wednesday March 13, 2019.  The ‘ex-date’ is when the shares start selling without the value of its next dividend payment so an investor needs to own the shares before the ex-date to receive the dividend. The dividend will then be paid on Friday April 12, 2019.

What is CSL’s dividend yield?

At its recent half year results CSL Limited declared an interim dividend of $1.20 per share for the six months to 31 December 2018. This was up 20% on the same period last year and gives CSL a trailing dividend yield of 1.2%, unfranked.

Is the dividend sustainable going forward?

So, sure, the dividend yield is not earth shattering, but CSL has a solid history of earnings growth and in 2018 the company paid out 45% of earnings per share in dividends.

This is important because it means CSL is keeping enough cash to fund aggressive Research and Development which maintains the company’s competitive advantage and underwrites the monster 42% return on equity.

It’s this program of re-investment that I think makes CSL one of the best ASX listed blue-chip companies to own today.

And in the short term the earnings growth is set to continue. In the company’s recent guidance update management noted that full year 2019 Net Profit After Tax (NPAT) is expected to to be towards the upper end of between $1.88 and $1.95 billion, growth of up to 14% over the prior year.

It was a positive update for investors, but if you rely on dividends to support your income today, CSL’s 1.2% yield might leave you underwhelmed. If that’s the case, another company going ex-dividend on 13 March to consider is Northern Star Resources Ltd (ASX: NST).

Better yet, when it comes to picking strong, high yielding businesses to supplement your income we think this company should be at the top of your watch-list today.

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Motley Fool contributor Regan Pearson has no position in any of the stocks mentioned.

You can follow him on Twitter @Regan_Invests.

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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