I think that Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is the best ASX dividend share for income-seeking investors. It's commonly called Soul Patts.
A quick overview of Soul Patts
Soul Patts is an investment conglomerate that has been listed in Australia since 1903. It's one of the oldest businesses on the ASX.
Everything about Soul Patts is set up to be thinking for the long-term. A great example of that is the long-term loyalty of the employees. More than 40 employees have worked for the company for over 50 years. Five generations of the Pattinson family have served the company, as have three generations of the Dixson, Spence, Rowe and Letters families. Soul Patts can point to continuing family leadership: Lewy Pattinson, Fred Pattinson, Jim Millner and current chair, Rob Millner.
The ASX dividend share aims to hold a diversified portfolio of mostly uncorrelated investments across listed shares, private equity, property and loans.
Current investment portfolio
I really like Soul Patts' portfolio. It owns large positions in shares such as TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), Australian Pharmaceutical Industries Ltd (ASX: API), Bki Investment Co Ltd (ASX: BKI), Milton Corporation Limited (ASX: MLT) and Clover Corporation Limited (ASX: CLV).
It also owns positions in a number of unlisted businesses like swimming schools, agriculture and resources. Soul Patts will soon be investing into regional data centres which seems to be a long-term growth trend.
The ASX dividend share doesn't just own private businesses outright. It also has large stakes in unlisted businesses such as Ampcontrol, which is a leading international supplier of electrical and electronic products with a strong presence in providing products and services to the mining sector.
Why the ASX dividend share has a good dividend reputation
Soul Patts has two of the most pleasing dividend record attributes. The company has paid a dividend every year since it listed in 1903. It has increased its dividend every year since 2000, the only ASX share to have done that.
I think it's critical that any ASX dividend share you consider must be able to continue to deliver reliable dividends.
There are plenty of valid argument points to say investors may as well invest for total returns rather than specifically dividends.
If someone is investing for dividends then that suggests to me that the income provided is important to fund their life expenses. If you're investing for dividend income then I think that dividend needs to be consistently reliable. An ASX dividend share needs to deliver income through all economic conditions. I think Soul Patts is the best ASX dividend share for its reliability.
It's no use having a big dividend one year and then getting no dividend income the next year if there's a recession. The global COVID-19 pandemic was clearly unexpected. But I think it has shown how some businesses which had a reputation for dividends – such as Westpac Banking Corp (ASX: WBC) and Sydney Airport Holdings Pty Ltd (ASX: SYD) – were unable to continue paying a dividend. They weren't very defensive.
Soul Patts has delivered consecutive dividend growth over the past 20 years and it has provided dividend guidance for growth in the next result.
Two of Soul Patts' biggest holdings, TPG and Brickworks, have indicated they are aiming for higher dividends over the next 12 months which should help Soul Patts fund a higher dividend too.
Future growth
You shouldn't buy an ASX share for dividends alone. It needs to have growth potential over the longer-term. Soul Patts' holdings are aiming for growth. TPG has merged with Vodafone Australia to create profit growth. Brickworks is expanding in the US and it's growing the industrial property trust.
Soul Patts is steadily putting money to work into new investment ideas. As I've mentioned, the ASX dividend share is investing into regional data centres. In FY20 the company retained around 20% of its net operating cashflow which can be put towards future growth opportunities.
I like Soul Patts as a dependable ASX dividend share. Other investments may deliver more capital growth over the coming years, but Soul Patts could be the most dependable option for dividends. At the current Soul Patts share price it has a grossed-up dividend yield of 4.2%.
