Why Washington H. Soul Pattinson and Co. Ltd increased its interim dividend for the 20th consecutive year

Shares in diversified investment company Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) are pushing higher today, up 1% to $17.67 following the release of the group’s half-year results.

The company posted a profit after tax of $146 million, 2% down from the previous corresponding period. Regular profit after tax, the company’s non-statutory measure of profit from continuing operations that excludes one-off items is up 19% to $166 million. Revenue from operations increased 25% to $550 million.

Soul Patts’ portfolio consists mainly of big stakes in ASX-listed companies from various industries. As at January 31, net asset value amounted to $5.2 billion, up 16% over the previous year. The company’s three largest holdings all increased in value in the first half of FY2018:

  • The value of the 25% interest in TPG Telecom Ltd (ASX: TPM) grew 14%, as the telco endured margin erosion brought about by the NBN transition with a good performance from its corporate division and plans to launch a mobile service in Singapore later this year
  • The value of the 50% interest in New Hope Corporation Limited (ASX: NHC) grew 32%, with the coal miner enjoying the tailwind of growing thermal coal prices sustained by strong demand in Asia
  • The value of the 44% interest in Brickworks Limited (ASX: BKW) grew 8%, as the company managed to maintain earnings thanks to record sales of building products and despite the underperformance of its land development segment

Soul Patts raised its interim dividend 4.5% to 23 cents per share fully franked. This is the twentieth consecutive increase from the company, which prides itself on never having failed to pay a dividend since listing in 1903.

Foolish takeaway

Soul Patts currently trades at 15.5x earnings, which can be considered a good price for a company with a diversified portfolio that has outperformed the ASX in the long run and never missed a distribution to its shareholders. I’d recommend buying this stock and holding it for the long term.

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Motley Fool contributor Tommaso Autorino has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended TPG Telecom Limited and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Brickworks. 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.

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