In the last few weeks, I have been buying Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares for my portfolio.
The investment conglomerate is not (yet) close to being my biggest position, but it's one that I'm regularly adding to.
For my own portfolio, I'm looking for ASX shares that can hopefully deliver long-term capital growth while also paying a good stream of dividends.
I think Soul Pattinson shares have the potential to tick both of the boxes for growth and dividend.
I like the diversification and investment strategy
Exchange-traded funds (ETFs) can be very effective investments, but I think the ASX is too heavily focused on just a few banks and resource businesses.
I believe Soul Pattinson offers effective diversification in a single investment, so it can be lower risk, and the diverse investment policy means the management team can go hunting in many places for opportunities.
It aims to (and has built) a "portfolio of assets generating reliable cash through market cycles which serves to protect downside in market corrections". It has also "partnered with attractive companies looking to access growth capital and undertake strategic acquisitions".
Soul Pattinson aims to invest for the long term, by being disciplined and using a value-focused approach through market cycles to deliver returns.
It has a few different parts to its portfolio – a strategic portfolio, a large cap portfolio, a private equity portfolio, an 'emerging' companies portfolio, a structured yield portfolio and a small property portfolio.
Strategic holdings include TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), New Hope Corporation Limited (ASX: NHC), Tuas Ltd (ASX: TUA), Apex Healthcare, and Pengana Capital Group Ltd (ASX: PCG). It owns sizeable stakes in these businesses
The large-cap portfolio has names including Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), Macquarie Group Ltd (ASX: MQG) and Woolworths Group Ltd (ASX: WOW).
Private equity holdings include agriculture, Ironbark, Aquatic Achievers and Ampcontrol. Soul Pattinson recently took full control of Ampcontrol, the largest privately owned engineering company. It is accelerating its strategy to be "at the forefront of developing and supplying advanced technology as well as innovative products and services that enable a competitive advantage in a net-zero carbon environment".
Growing dividends
One of Soul Pattinson's main aims is to grow dividends for shareholders. It has increased its annual dividend every year since 2000. Growing operating cash flow enables higher dividend payments.
The FY22 interim dividend was increased by 11.5%.
Why I bought more Soul Pattinson shares
Aside from all the elements that I've already outlined, one of the simplest reasons I bought more shares was the fall in the Soul Pattinson share price. At the time of writing, it is down around 20% this year to date. Though, I did buy it at an even lower price.
Also, while coal isn't my favourite investment, the strong coal price is helping fund large dividends to Soul Pattinson from New Hope. It can then use that money to invest in more opportunities (and fund higher dividends).
