There are some compelling reasons why Washington H. Soul Pattinson and Co. Ltd (ASX:SOL) is such a good ASX dividend share.
The post 3 reasons why Soul Patts (ASX:SOL) is a great ASX dividend share appeared first on The Motley Fool Australia. –
There are some key reasons why Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is a popular ASX dividend share. This business is also called Soul Patts, for short.
What is Soul Patts?
Soul Patts is an investment conglomerate that has been listed since 1903.
Its leadership has consisted of successive family members who value the history of the company.
More than 40 employees have worked for the company for over 50 years. Five generations of the Pattinson family have served the company, as have three generations of the Dixson, Spence, Rowe and Letters families.
The company started out as an Australian pharmacy business. It still has indirect investment exposure to pharmacies with an investment in Australian Pharmaceutical Industries Ltd (ASX: API).
Here are some reasons why Soul Patts is an interesting ASX dividend share:
A diversified portfolio means that the diversification may be able to lower risks when it comes to specific company risk or industry risk.
Soul Patts is invested in a variety of different industries such as telecommunications, building products, resources, listed investment companies (LICs), agriculture, swimming schools, financial services, healthcare, pharmacies and electrical and electronic products.
Those industries are represented by both ASX shares and non-ASX and unlisted companies. Its listed holdings include TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), API, New Hope Corporation Limited (ASX: NHC), Bki Investment Co Ltd (ASX: BKI), Milton Corporation Limited (ASX: MLT), Clover Corporation Limited (ASX: CLV) and Palla Pharma Ltd (ASX: PAL).
Some of the non-ASX share businesses include Round Oak Minerals, Apex Healthare, Ampcontrol and Aquatic Achievers.
Its objective is to deliver superior returns to our shareholders by creating capital growth along with steadily increasing dividends.
Soul Patts is a long-term investor with a broad mandate. The flexible mandate allows Soul Patts to invest in companies at an early stage and grow with them over the long-term.
Its approach is to be counter cyclical and be focused on value. For example, it recently made its investment into agriculture at a time when Australia was going through one of its worst droughts.
Soul Patts described itself as a trusted partner that actively assists its portfolio companies in accessing growth capital and undertaking strategic acquisitions.
The ASX dividend share has been a long-term investor in TPG, ever since it was a much smaller company. The New Hope investment was another time Soul Patts invested in a business when it was much smaller.
Long-term dividend record
Soul Patts has two different dividend records.
One of the records that the ASX dividend share likes to tout is that it has increased its dividend every year since 2000. That actually means that Soul Patts has the longest dividend growth streak on the ASX. Ramsay Health Care Limited (ASX: RHC) used to have a strong dividend record too, but that ended in 2020 due to COVID-19.
The other dividend record that Soul Patts has is that it has paid some sort of dividend every year going back to 1903, including through world wars, recessions and the Spanish Flu.
Soul Patts funds its growing dividend from its investment portfolio income. Businesses like TPG and Brickworks provide the bulk of the money used to fund the growing dividend. The rest of the net cashflow is re-invested into other opportunities for more growth.
In terms of the current dividend yield at the current Soul Patts share price, it has a trailing grossed-up yield of 3%. If the FY21 dividend is 62 cents per share, then it has a forward grossed-up dividend yield of 3.1%.
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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. The Motley Fool Australia has recommended Ramsay Health Care Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.