How much do you need to invest in CSL shares for $8,000 in annual dividends?

CSL's dividends are exponentially more valuable for long-term investors.

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It's probably fair to say that most ASX investors who buy shares of CSL Ltd (ASX: CSL) don't do so for the dividend income potential.

Unlike most of the top shares on the S&P/ASX 200 Index (ASX: XJO) like Commonwealth Bank of Australia (ASX: CBA) or BHP Group Ltd (ASX: BHP), CSL has never been regarded as a generous dividend income payer. The healthcare giant has typically offered a dividend yield of around 1% for most of the past five years.

Those dividends don't usually come fully franked either, which further decreases CSL's appeal to ASX income investors.

However, as we've covered before, this reputation somewhat disguises CSL's true worth as a dividend stock. After all, CSL has successfully and relatively consistently been raising its dividend payments to shareholders over the past decade.

To illustrate, this company paid out a total of 91.04 cents per share in dividends back in 2013. But after a decade of raising its payouts almost every year, 2023 saw the company dole out a much-improved $3.63 in dividends per share.

This year's interim dividend of $1.80 per share was another increase over last year's equivalent payout of $1.62.

With dividend growth like that, it's conceivable that an investor today can expect to see at least some substantial income from buying CSL shares today.

But let's get to the bottom of that question by checking out how much money you'd need to invest in CSL shares to bag yourself $8,000 a year in passive dividend income.

How much would you need to spend on CSL shares to bag $8,000 in passive income?

Let's start by assuming that CSL will pay out the same $3.80 over the coming 12 months as it has over the past 12 months. We should always hope, rather than assume, that a company's dividends will at least be maintained at the previous year's levels.

Remember, there is no obligation for any company to maintain a previous year's payout levels. Or any dividends at all for that matter.

But CSL does have a pretty good track record in this department, as we've already established. So for argument's sake, we'll assume CSL's dividends will remain at least stable for the next 12 months.

At the current CSL share price of $276.14 (at the time of writing), that $3.80 in dividends per share gives CSL a trailing dividend yield of 1.19%.

This means that in order to secure $8,000 in annual passive dividend income from this ASX 200 healthcare stock, one would need to spend approximately $672,300 buying up CSL shares at the current stock price.

That's obviously not a great source of passive income relative to the capital requirement. To illustrate, to secure $8,000 in annual dividend income from Westpac Banking Corp (ASX: WBC) shares right now, you'd only need to fork out around $145,000 on Westpac stock at its present pricing. That's the difference between a starting yield of 1.19% and 5.52%

Growth and dividends

However, as we noted at the start, CSL has never made dividend income a priority for shareholders. This company has historically chosen to spend its free cash flow on research and development and other avenues that could lead to overall business growth, rather than paying shareholders out.

Saying that, long-term shareholders have still enjoyed plenty of dividend income, thanks to this company's long track record of raising its dividends. An investor who bought CSL shares back in 2013 would be enjoying a Westpac-like yield of around 5.6% on their cost today.

So keep all of this in mind if you're considering buying CSL shares for your ASX stock portfolio today.

Motley Fool contributor Sebastian Bowen has positions in CSL. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. The Motley Fool Australia has recommended CSL. 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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