There are at least two ASX shares in my portfolio that I plan to own until I’m 100.
I think owning shares for the ultra-long-term is the best way to invest, if you can find the right ideas. Less transactions means less brokerage costs and less capital gains tax events. You don’t want to hand over more of your compounding wealth to tax than necessary, if you can help it.
But you can’t commit to holding any random share for the ultra-long-term. It needs to be a business which has a sustainable long-term business model and has the potential to beat the market over many years.
These are (at least) two ASX shares that I can see myself holding for many years to come:
Rural Funds Group (ASX: RFF)
Rural Funds is an agricultural real estate investment trust (REIT). It owns a variety of farm types including almonds, macadamias, cattle, cotton and vineyards.
Farmland has been a useful asset for hundreds of years, I don’t think that’s going to change for the next few decades at least, unless technology somehow completely changes our food production.
The farmland landlord tries to lease its farms to high-quality tenants like Olam, JBS, Select Harvests Limited (ASX: SHV) and Treasury Wine Estates Ltd (ASX: TWE). It’s these large businesses that are the ones most likely to remain financially resilient and keep paying rent even during a recession. They also have the most resources to afford investing for growth, which will help Rural Funds charge higher rent in future years.
The ASX share has a diversified property portfolio, not just by the farm type but also geographically. Rural Funds’ farms are spread across different states and climactic conditions, which somewhat reduces the risks. The REIT owns a lot of water entitlements for tenants to use.
Rural Funds is a good option for long-term income. It has rental indexation built into its contracts – the contracted growth is either a fixed 2.5% annual rise or it’s linked to CPI inflation, plus market reviews.
The REIT regularly invests in productivity improvements at its own farms, which should boost the value of its farm and lead to long-term rental growth.
Occasionally the ASX share will make acquisitions that diversify the farm’s holdings further and increase the earnings potential.
Management aim to increase the distribution by 4% each year. At the current Rural Funds share price the FY21 distribution guidance of 11.28 cents per unit equates to a forward yield of 5.4%.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Patts has already been listed on the stock exchange since 1903. I think it has a great chance of being around until at least 2103 because of how it operates.
It’s an investment conglomerate that invests in both listed and unlisted businesses. It can change its investments as the years go by. Each of its large equity investments were once a lot smaller and Soul Patts has benefited from their long-term growth.
Some of the ASX shares that Soul Patts owns are: TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), New Hope Corporation Limited (ASX: NHC), Bki Investment Co Ltd (ASX: BKI) and Clover Corporation Limited (ASX: CLV).
Soul Patts’ unlisted businesses include resources, agriculture and swimming schools. Soon it will be invested in regional data centres.
The management of Soul Patts try to invest in a contrarian fashion with a defensive focus. For example, swimming schools is one of those services you’d expect parents to keep using even during a recession. Though this COVID-19 pandemic brought up some difficult conditions.
The ASX share has outperformed the ASX index over the ultra-long-term and I think that could continue with its new investments like regional data centres and agriculture.
I also think that the ASX share is one of the best dividend shares. It has grown its dividend every year since 2000. It has paid a dividend every year since it listed in 1903. That’s a great, reliable record.
Soul Patts funds its dividend from the investment income it receives. In other words, the dividends and interest it receives from its assets. After paying for its expenses, it then pays out a large percentage of the cashflow as a dividend to shareholders. But that cashflow stream is steadily growing as Soul Patts’ investments grow their dividends.
At the current Soul Patts share price it offers a grossed-up dividend yield of 4.25%.
Both of these ASX shares could be around for many decades to come. I think they can both deliver growing dividends and long-term capital growth.
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Tristan Harrison owns shares of RURALFUNDS STAPLED and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Clover Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, RURALFUNDS STAPLED, and 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 Scott Phillips.