The ALL ORDINARIES (Index: ^AXAO) (ASX: XAO) is down another 0.5% this morning – not the best early Christmas present.
Instead of a Christmas Santa rally we're getting a Christmas Grinch rally. With that in mind, it could be worth sticking with the most reliable shares that will keep generating profits and continue paying pleasing income, perhaps even growing income, through these troubled times.
That's why I'm looking to buy more shares of the following two businesses:
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Patts has been perhaps the most reliable business on the ASX over the past two decades. It's an investment conglomerate that invests in other businesses that the management team believe have good long-term growth potential.
Some of its largest holdings include TPG Telecom Ltd (ASX: TPM), Brickworks Limited (ASX: BKW) and Australian Pharmaceutical Industries Ltd (ASX: API).
The total shareholder returns that Soul Patts has generated has soundly outperformed the returns of the ASX index over longer-term time periods. Its growing cashflow allows it to pay a steadily-growing dividend stream to shareholders.
Indeed, it has paid a dividend every year of its existence including through wars and recessions. Soul Patts has increased its dividend every year since 2000 – that's a great record, only one other ASX business can claim the same record.
Soul Patts is currently trading at 18x FY20's estimated earnings with a grossed-up dividend yield of 3.3%.
Rural Funds Group (ASX: RFF)
Farmland has been a very good investment for hundreds of years, so I'm sure it will continue to be useful for the next few decades.
Rural Funds is a farmland landlord that owns a diverse portfolio of farms including almonds, macadamias, vineyards, poultry, cattle and cotton. I like that the farms are spread across different climates and different states. The more diverse Rural Funds becomes, the 'safer' it will become.
The real estate investment trust (REIT) aims to increase the income distribution to shareholders by 4% every year. It achieves this through a variety of ways, but the main two contributors are rental indexation and re-investing into its properties.
All of its rental contracts have rent increases built in that are linked to either a fixed 2.5% increase or CPI inflation. Rural Funds currently has a payout ratio of around 80% of profit, allowing it to make improvements at its properties with the retained 20% – further growing the rental potential.
Rural Funds currently has a distribution yield of 4.8%.
Foolish takeaway
These two shares have been very dependable profit growers and income payers over the past several years. I wish I could go back in time and buy a lot more shares when they were a lot cheaper than today!
But, because they reliable they are unlikely to trade at a cheap price, nor are they going to grow at a fast pace year after year. Therefore, there could be better growth shares out there for your portfolio than Rural Funds and Soul Patts.
