Is Soul Patts (ASX:SOL) the best dividend stock on the ASX?

There are very few businesses in Australia that are older than Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) (Soul Patts).

Businesses are not like our bodies or wine, they don’t necessarily get better or worse with age. However, it does show that Soul Patts has excellent staying power.

Soul Patts is an investment conglomerate company that takes large long-term investment stakes in other businesses. I believe its this ability to change its holdings which has allowed Soul Patts to remain completely relevant all this time. It can change its investment direction in a day if it wanted to.

At the moment some of its biggest holdings include TPG Telecom Ltd (ASX: TPM) and Brickworks Limited (ASX: BKW).

So, is Soul Patts the best dividend stock?

The dividend yield

Any dividend investor is looking for a decent starting yield. Soul Patts currently has a grossed-up dividend yield of 3.9%.

That’s definitely not the biggest yield around, but there’s more to consider with the dividend than just the yield.

Dividend history

Soul Patts has increased its annual ordinary dividend every year since 2000. Only one other quality company has a dividend history like that on the ASX – Ramsay Health Care Limited (ASX: RHC).

Payout ratio

I think it’s also important to be aware of the payout ratio. A company that’s paying out 100% (or more) of its earnings is very likely to cut the dividend at some point, like Telstra Corporation Ltd (ASX: TLS) recently did.

In its recent half-year report Soul Patts said that its payout ratio would be 74.69% of its regular operating cash flows. There is some safety with its payout ratio.

Dividend growth

Soul Patts has increased its dividend at a decent rate. In its latest half-year result it increased its dividend by 4.5%. Over the past 15 years its dividend has increased by a CAGR of 9.4%.

Foolish takeaway

Soul Patts has outperformed the ASX index over the long-term. I believe it will continue to do well with its diversified approach and it is one of the shares most likely to continue increasing its dividend every year over the next decade.

Another good dividend idea is this top stock, it just increased its dividend by more than 25%.

Breaking news: ASX companies set to raise dividends!

It's been a nail-biter of a reporting season here in the first half of 2018.

But the real action, in my opinion, is what companies are doing with dividends.

What does this mean for you? Well there is one stock I've found that could very well turn out to be THE best buy of 2018. And while there's no such thing as a 'sure thing' when it comes to investing - this ripper might come as close as I've ever seen.

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Motley Fool contributor Tristan Harrison owns shares of Ramsay Health Care Limited and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited, TPG Telecom Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Brickworks and Ramsay Health Care 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.

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