Arguably one of the biggest benefits of buy and hold investing is growing dividends.
A prime example of why this is the case is biotherapeutics giant CSL Limited (ASX: CSL).
Based on the current CSL share price, the company's shares offer investors a rather paltry 1% dividend yield.
In light of this, few people (if any) would class CSL as a dividend share. Especially when compared to the likes of telco giant Telstra Corporation Ltd (ASX: TLS) and big four bank Commonwealth Bank of Australia (ASX: CBA).
However, there will be a small group of investors that get incredibly excited twice a year when CSL pays its dividend – its early investors.
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Why is this?
Long before listing on the Australian share market, CSL was known as Commonwealth Serum Laboratories. It was established in Melbourne in 1916 to service the health needs of a nation isolated by war.
Since then it has provided Australians with access to 20th century medical advances including insulin and penicillin, and vaccines against influenza, polio and other infectious diseases. Next year it is quite likely to be supplying the country with a COVID-19 vaccine.
CSL eventually landed on the Australian share market in 1994 for the equivalent of 76 cents per share. This means that if you invested $50,000 into its shares at that point, you would have approximately 65,800 shares.
According to a note out of Ord Minnett, its analysts are expecting the company to pay a ~$3.34 dividend in FY 2021. If this proves accurate, it will mean that those early investors will be receiving a yield on cost (the yield on the price you paid for shares) of 440%.
This equates to an incredible $219,772 in dividends over the next 12 months, which is 4.4 times their original investment. All for just buying and then holding onto those shares over the years.
This is quite staggering and goes some way to demonstrating just how effective buy and hold investing can be.
