CSL Limited (ASX: CSL) shares have been paying passive income to shareholders for many years. The ASX healthcare share isn't known for being an ASX dividend share, partly because it is better known for the profit growth and capital growth it has delivered.
Profit growth is good because it means shareholders are entitled to more profit. It's up to the board (and management) to decide how much profit to retain and how much to pay out to investors.
CSL has a very good reason to hang onto its cash – it's investing more than $1 billion in research and development each year to create new treatments and vaccines.
Achieving profit growth allows the company to both invest in its pipeline and reward shareholders.
Let's have a look at how much dividends we'd get if we invested $10,000 into CSL shares.
Dividend projection
I'm not a member of the CSL board, so I don't know what the company is planning to pay shareholders for FY23 or FY24.
We can use the current estimates for what the dividend passive income is going to be.
According to Commsec, the ASX healthcare share is expecting to pay an annual dividend per share of $3.45 in FY23, though it's already paid the interim dividend for FY23.
In FY24, the current annual dividend per share is projected to be $3.90, which would represent year-on-year growth of 13% if that were to happen.
CSL shares passive income potential
Investing $10,000 into CSL shares would mean that we could buy 38 shares – it costs a lot to buy each one.
Using the FY23 annual payout of $3.45 per share, this would mean a $10,000 investment would generate $131.10 of passive dividend income.
If we calculate the numbers based on FY24's possible payment, it'd create investment income of $148.20.
As we can see, we're not going to create much passive income from owning CSL shares, for starters at least, due to two main reasons.
One, it has a relatively low dividend payout ratio – it's expected to pay out less than half of its earnings per share (EPS) in FY23 and FY24.
Second, it trades on a relatively high price/earnings (p/e) ratio. This sometimes happens when the market is expecting a lot of profit growth over the next few years.
For that reason, I wouldn't focus on CSL shares because of the dividend, but the total returns, which is capital growth and the dividends combined, could be attractive if things go well for the company.
