It’s times like this that dividend shares are really important.
Share prices are going down. That’s understandable, there’s a lot of uncertainty in the market so investors are willing to sell their shares at much cheaper prices than a couple of months ago.
Warren Buffett is one of the best investors in the world. He has little exposure to Australia, but I think he’d really like these two dividend shares if he were an Aussie investor:
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Patts is the business that’s most like Berkshire Hathaway. Warren Buffett has most of his wealth tied up in Berkshire Hathaway. Soul Patts is often called Australia’s Berkshire Hathaway because it operates in much the same way. It takes investment positions in listed businesses and it also owns private businesses outright.
Some of its largest positions include defensive telco business TPG Telecom Ltd (ASX: TPM), diversified property business Brickworks Limited (ASX: BKW) and pharmacy company Australian Pharmaceutical Industries Ltd (ASX: API).
It’s been going since the early 1900s. it has already lived through the ‘Spanish’ Flu, two world words and two painful economic crashes. I think Soul Patts will get through this as well.
Soul Patts has paid a dividend every year in its existence. It has increased its dividend every year for the past 20 years and it currently offers a forward grossed-up dividend yield of 4.4%.
APA Group (ASX: APA)
Two of Berkshire Hathaway’s largest businesses are its railways and Berkshire Hathaway Energy. Whilst APA is not exactly the same as those two Berkshire subsidiaries, there are elements of both that are similar to APA.
APA Group owns a vast network of 15,000km of natural gas pipelines around Australia with a presence in every mainland state and the Northern Territory. It also owns or has interests in gas storage facilities, gas-fired power stations and renewable energy generation (wind and solar farms). It owns, or manages and operates, a portfolio of assets worth more than $21 billion and delivers half the nation’s natural gas usage.
Energy is essential and will continue to be in demand during the coronavirus outbreak, which APA helps deliver.
It has increased its distribution each year over the past 15 years and it was recently named one of UBS’ preferred picks during the outbreak.
It currently has a distribution yield of 4.9%.
I really like both of these businesses, particularly for reliable cashflow and dividends. I’d prefer to buy Soul Patts, and may buy more later this week after the result, but APA is solid too.
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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 and has recommended 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.