3 reasons why the Washington H. Soul Pattinson and Co. Ltd share price is a buy

The Washington H. Soul Pattinson and Co Ltd (ASX: SOL), or “Soul Patts”, share price has made a good recovery over the past three months, growing from $14.50 to today’s price of $16.37.

Soul Patts is an investment conglomerate company with a market capitalisation of $3.9 billion. It’s commonly compared to Warren Buffett’s Berkshire Hathaway. Here are three reasons why I think the share price will keep growing:

Large stakes of ownership

The comparison to Berkshire Hathaway is because of its large stakes in various businesses.

Some of Soul Patts’ investments include a 25.2% stake of TPG Telecom Ltd (ASX: TPM), a 59.7% stake of New Hope Corporation Limited (ASX: NHC), a 44.1% stake of Brickworks Limited (ASX: BKW), a 24.6% stake of Australian Pharmaceutical Industries Limited (ASX: API) and a 10.9% stake in BKI Investment Co Ltd (ASX: BKI).

Having this diverse yet concentrated portfolio means Soul Patts can invest in any business it thinks will provide the best return over the long term.

It also means that if any of its main share holdings grow strongly, it will positively impact the Soul Patts share price too. For example, if the TPG share price recovers later this month when it reports, the Soul Patts share price could grow nicely as well.

Long-term management

Soul Patts has been listed on the ASX since 1903. Over the 110 years it’s been listed it has been run by the same family. More than 40 employees have worked for the company for over 50 years.

Five generations of the Pattinson family have served the company, as well as three generations of the Dixson, Spence, Rowe and Letters families.

Having this type of long-term management means Soul Patts can make long-term decisions, which should result in strong long-term results.

Great dividend payer

The Australian share market loves a good dividend payer. Soul Patts has paid a dividend every year since it listed in 1903, even during wars.

Soul Patts has increased its ordinary dividend every year since 2000. This has provided shareholders with a delightful and growing stream of fully franked dividends.

Any investor looking for security and growing income can’t go too far wrong with Soul Patts.


The main risk with Soul Patts is if it produces poor returns. It’s hard to deliver market-beating returns consistently every year when you own the same businesses. Sometimes one business, such as TPG, may have a bad year.

The other main risk is when management changes, the future leaders of Soul Patts may not be able to produce as consistent returns as the current leadership team.

Foolish takeaway

I think Soul Patts is one of the most defensive and well run companies on the ASX. It’s currently trading at 21x FY17’s estimated earnings with a grossed-up dividend yield of 4.54%. At the current price I think Soul Patts is worth a place in every Foolish portfolio. For more great blue chips you should read this report.

Top 3 ASX Blue Chips To Buy In 2017

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Motley Fool contributor Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of 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 Bruce Jackson.

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