A funny thing happens with ASX dividend shares – they only start attracting the attention of income investors when their growth starts to peter off. Dividends are paid out of a company's earnings, so it's only when a company decides it can't employ capital for a reasonable return it starts to shovel it out to its shareholders.
Take an ASX bank like National Australia Bank Ltd (ASX: NAB). NAB shareholders who bought in around 5 years ago would be looking at a yield on cost of around 5–6%, which is around the same as those who buy NAB shares today. NAB hasn't increased its payout since 2014 and actually cut both its interim and final dividend payouts this year, while the NAB share price has actually fallen since 2013 compared with today's level.
Let's compare this to CSL Limited (ASX: CSL). CSL only started paying a dividend in 2013 – decades after NAB started their shareholder cash rewards. CSL's first dividend was around $1 per share, but in 2019 CSL paid out $2.65 per share.
Since CSL shares were going for anywhere between approximately $55 and $65 back in 2013 – anyone who picked up shares then would be looking at a yield on cost for the 2019 dividends of roughly 4.42%. This doesn't even take into account the 350% rise in the CSL share price since then. What's more is that even today, CSL only pays out around 45% of its earnings.
Now this still doesn't match NAB's raw yield, but given CSL has bumped up their payouts substantially each year since 2013, it's only a matter of time until parity will be achieved for those lucky investors who bought in back in 2013.
I know which one I wish I'd bought….
