I think these 2 S&P/ASX 200 Index (ASX:XJO) shares are robust and worth having in a defensively-minded portfolio for long-term growth.
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I think there are some S&P/ASX 200 Index (ASX: XJO) shares that are robust and defensive, yet still offer good growth prospects.
Most ASX 200 shares are big enough that they offer good reliability. But I think they also need growth. The growth depends on the sector(s) they operate in. That’s why I like these options:
Goodman Group (ASX: GMG)
Goodman is the biggest ASX property business. It builds and owns industrial properties across the world in places including Australia, New Zealand, Europe, the UK and North America.
Industrial properties are growing increasingly important in this COVID-19 world. E-commerce is rapidly growing in demand compared to a year ago. Businesses want to improve their logistics and efficiency with the supply chain being impacted by COVID-19.
Despite everything that went on with COVID-19 during FY20, it managed to grow operating profit by 12.5% to $1.06 billion and operating earnings per share (EPS) rose by 11.4% to 57.5 cents – compared to initial guidance of growth of 9%.
The ASX 200 share has a really strong balance sheet for a real estate investment trust (REIT). Its gearing dropped to 7.5%, down from 9.7% in FY19. I think that makes it a much safer option compared to other REITs.
The business is one of the few REITs to deliver growth in its operating earnings and net tangible assets (NTA). The FY20 NTA per share increased 9.4% to $5.84.
Its property portfolio looks strong with an occupancy rate of 97.5% as well as like for like net property growth of 3%.
The ASX 200 share still has a lot of growth planned with $6.5 billion of work in progress across 46 projects.
The Goodman share price may seem expensive on traditional valuation metrics, but these really low interest rates may stay low for many years.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Investment house Soul Patts is one of the most robust ASX 200 shares in my opinion.
It has been listed since 1903, so it’s actually one of the oldest businesses in Australia. It has already survived through the first world war, the Spanish Flu, the Great Depression, the second world war, the GFC and various other historical events.
Soul Patts has a diversified portfolio of shares. It has large positions in defensive businesses like TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), Clover Corporation Limited (ASX: CLV), Milton Corporation Limited (ASX: MLT) and Bki Investment Co Ltd (ASX: BKI). It also has defensive unlisted positions like Ampcontrol, agriculture and swimming schools.
At 31 July 2020, its total shareholder returns (TSR) showed strong outperformance over the medium-term and the long-term. Its TSR outperformed the All Ordinaries Accumulation Index by 5.1% per annum over the previous five years and 5.2% per annum over the previous 20 years.
The ASX 200 share’s FY20 report was a mixed result because of COVID-19, but there were two highlights from the year for me. The TPG merger with Vodafone has finally happened, which should make a big difference for the longer-term profit outlook for TPG, and therefore it should help the value of those shares for Soul Patts. The investment house also reported that its net cash from its investments in FY20 rose by 48.8% to $252.3 million – this is an important profit measure because the net cash flow is what funds the dividend.
The investment house has increased its dividend every year since 2000. That’s a fantastic record, the best on the ASX. At the current Soul Patts share price it offers a grossed-up dividend yield of 3.3%.
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Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Clover Limited. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.