3 reasons why the Soul Patts (ASX:SOL) share price could be a buy

Soul Patts is an interesting business that may be worth considering.

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The Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) (Soul Patts) share price may be one worth considering for a few different reasons.

This investment conglomerate is one of the oldest businesses on the ASX, having been around for almost 120 years.

Its historical performance shows outperformance of the index over the last five, ten and twenty years.

But there could be good reasons to continue to think about this business:

Lower price

A lower price can be an attractive thing when considering to buy shares of a business. A cheaper price doesn’t always mean better value, however if the underlying business has not changed then that could signal that it’s an opportunity.

Over the last month the Soul Patts share price has fallen by almost 15%.

It may be worth keeping in mind that there is an underlying portfolio value of Soul Patts because of all of its investments in businesses like TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW) and New Hope Corporation Limited (ASX: NHC). That particular trio of companies are investments that Soul Patts has held for many years when they were much smaller businesses.

Increasing diversification

Soul Patts is working on becoming an even more diversified business with continuing growth potential.

The investment conglomerate aims to have a portfolio of assets which generate reliable cashflow through market cycles which serves to protect downside in market corrections.

It also looks to invest for the long-term with a disciplined and value-focused approach to investing through market cycles to deliver returns.

Soul Patts’ investment style allows it to invest in and support companies from an early stage and grow with them over the long-term. It can invest in various asset classes such as listed equities, private equity, venture capital, property, structure credit and cash.

The business has been investing in new areas in recent years. The investment conglomerate has been investing in agriculture and luxury retirement living.

However, after the recent acquisition of the listed investment company (LIC) Milton, it is now looking at other areas. The Milton CEO and managing director has become the new chief investment officer of Soul Patts. Mr Brendan O’Dea has had a number of roles, including being the chief operating officer of Citigroup’s Pan Asian Equities, head of Japanese equities and head of US equity proprietary investments.

Soul Patts outlined it is looking to build around platforms for growth. Some of the key thematics that it’s looking at includes education, financial services, agriculture, energy transition and health and ageing. The investment conglomerate noted the sell down of some of Milton’s large cap shares will be used for private markets, global shares, property, ‘structured yield’ and ‘real assets’.

Dividend record

One of the key objectives of Soul Patts is to deliver a consistent growing dividend. It has been successful with this goal for over 20 years. The company is the only one in the All Ordinaries Index to have achieved this growth record.

Soul Patts believes that the merger with Milton will allow for higher cash generation from increased portfolio dividends.

In FY21, it continued its dividend growth streak with an increase of the total dividend by a further 3.3%.

At the current Soul Patts share price, it has a grossed-up dividend yield of 2.7%.

Should you invest $1,000 in Soul Patts right now?

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Motley Fool contributor Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Brickworks. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended TPG Telecom Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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