Income is important to many investors. But some investors would rather accept a much lower dividend today, for the chance of massive dividends in the future.
With that in mind, here are two companies which have a low yield today, but could end up paying out far more income over the long term, than some of the typical high-yield shares.
Corporate Travel Management Ltd (ASX: CTD)
Having only been listed for seven years, Corporate Travel Management has certainly built an impressive history so far. The company provides travel management solutions to businesses throughout Australia & New Zealand, the USA and Asia.
And it seems to be doing it better than anyone else. It's had no trouble winning clients, with revenue increasing ten-fold, from $31 million in 2010, to over $320 million in 2017.
In the last five years, the total shareholder return has been a whopping 47% per annum. Corporate Travel has managed to grow its earnings by 29% per year. And over that time the dividend to shareholders has also grown by 27% per year.
At first glance it doesn't look cheap, with a forward price-to-earnings (PE) ratio of 30. But with earnings (according to some analysts) forecast to grow by around 30% per annum over the next two years, the price could very well be justified.
The current dividend yield is 1.4%, plus franking credits, making it a grossed-up yield of 2%.
CSL Limited (ASX: CSL)
Quickly growing into one of the largest companies on the Australian share market, CSL needs little introduction.
The superstar biopharmaceutical company lifted profit guidance last month after better-than-expected product sales, and for FY18 it expects to deliver a net profit after tax of around US$1.7b.
Over the last 10 years, CSL has delivered investors a total shareholder return of 20% per annum. And looking back further, over the last 20 years, the dividend has grown at a rate of 13% per annum.
The company is currently trading for around 39 times earnings, based on management's recent guidance. Earnings are forecast to grow by around 24% per annum over the next 2 years.
Foolish takeaway
Based on current prices and growth forecasts, Corporate Travel Management appears to be better value. Holding high-quality companies like this is a proven way to build substantial wealth and income, over the long term.
