I have been looking at IPOs recently to see how you would have fared if you had invested in them.
On this occasion, I have turned my attention to CSL Limited (ASX: CSL).
The Commonwealth Serum Laboratories was established in Melbourne in 1916 to service the health needs of a nation isolated by war.
Since then, it has gone on to become one of the world’s leading biotherapeutics companies and is saving millions of lives through the development of important therapies and vaccines.
The CSL IPO.
CSL was listed on the Australian share market in 1994 for a stock-split-adjusted price of $0.76 per share.
This means that if you invested $10,000 into the CSL IPO, you would have received 13,157 shares.
At the time of its listing, CSL was generating revenue of A$193 million a year. Whereas in FY 2020, CSL reported a 7.2% increase in sales revenue to US$8,797 million.
Unsurprisingly, this remarkable sales growth over the last quarter of a century has resulted in significant share price appreciation for shareholders.
In February, prior to the pandemic, the CSL share price hit a record high of $342.75. Today, the company’s shares are changing hands for $296.67.
This means that even though CSL’s shares are down 13.5% from their high, they are still up a remarkable 390x from their IPO price.
What does this mean for your original investment?
With the CSL share price at $296.67, the 13,157 shares you received when investing $10,000 into its IPO would have a market value of approximately $3.9 million today.
But it doesn’t stop there. Each year CSL shares a portion of its profits with shareholders in the form of dividends.
In FY 2021 the company is forecast to pay shareholders a dividend of $3.04 per share. If this proves accurate, those 13,157 shares will generate dividends of just under $40,000.
It is worth remembering that CSLs are a rare breed and very few IPOs will be anywhere near as successful.
However, overall, I believe this demonstrates why buying and holding high quality companies can be a fantastic way to generate wealth over the long term.
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Returns as of 6th October 2020
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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