When you hear the phrase 'dividend shares', you probably jump to the big names like Commonwealth Bank of Australia (ASX: CBA) or BHP Group Ltd (ASX: BHP).
But these companies didn't start paying massive yields overnight – it takes years for a company to grow to the size where it can offer a huge but consistent payout.
Sure, you can get a yield-on-cost of 5.4% if you buy CBA shares today. But anyone who bought back in the CommBank float of 1994 for $5.40 per share (if you're thinking this is weirdly close to CBA's yield, it's a coincidence!) would be looking at a yield-on-cost of 80% per annum today – not a bad investment at all.
So here are two ASX shares which I think could be dividend kingpins in a decade or 2 (maybe even the 'next CBA'), based on their dividend growth.
CSL Limited (ASX: CSL)
CSL is primarily known as a healthcare growth stock – and for good reason. CSL shares have returned roughly 230% in share price appreciation to its lucky investors over the past 5 years and continues to crank out double-digit growth numbers, despite its $128 billion market cap.
But what's not often noticed is CSL's dividend payment. The company only started paying a dividend back in 2013, but today CSL's dividend is already worth around twice as much as its inaugural payment. That means any investor who bought in around 2013 would be looking at a yield-on-cost of around 4.5% today – definitely the direction you want things to be going as an investor!
NIB Holdings Ltd (ASX: NHF)
NIB is another company quietly but consistently raising its dividend payouts. Being a top grower in the health insurance space, NHF shares have also enjoyed stellar share price growth around 111% over the last five years.
But NIB has also grown its dividend at a healthy rate during this time as well. In 2010, NIB paid out 7 cents per share in dividends, but last financial year (FY19) it was 23 cents per share that the company was dishing out to its shareholders. That means that any investors who bought NHF shares back in 2010 would be looking at a yield-on-cost of 18.4% today – read it and weep.
Foolish takeaway
I think true stock market wealth can be made by finding these kinds of companies early and holding them for the long-term. Compound interest is a wonderful thing, especially when it involves rising dividend payments. Whilst CSL shares are perennially expensive, NIB is looking like good value on today's prices, in my opinion.
