Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares have done very well in 2023 so far. The company's share price is up 23% year to date, as we can see on the chart below. That compares to a 3% rise for the S&P/ASX 200 Index (ASX: XJO).
Soul Pattinson is an investment house invested across numerous sectors including resources, telecommunications, agriculture, swimming schools, financial services, and many more.
In terms of ASX shares, it holds names such as TPG Telecom Ltd (ASX: TPG), New Hope Corporation Limited (ASX: NHC), Brickworks Limited (ASX: BKW), Macquarie Group Ltd (ASX: MQG), and BHP Group Ltd (ASX: BHP).
There are a few reasons why I'd still call Soul Pattinson shares a buy.
Diversification
One of the most important factors to remember with investing in the ASX is that we don't know what's going to happen next, so diversification helps to lower risks. Just because something has gone down doesn't mean it's going to recover but, by the same token, just because something has gone up doesn't mean it's going to fall either.
Regardless of what happens next, I believe the Soul Pattinson portfolio is positioned to perform.
Soul Pattinson says it pays a lot of attention to managing investment risks to protect against the downside, with a focus on businesses that can generate reliable and growing cash flow.
According to Soul Pattinson, its portfolio "offers shareholders exposure to a range of investments that perform throughout the cycle and have delivered above market returns for decades".
As of 31 January 2023, Soul Pattinson shares had generated net returns per annum of 12.3% over the prior 20 years, outperforming the All Ordinaries Accumulation Index (ASX: XAOA) by an average of 3% per annum over that time.
Ability to change the portfolio
Soul Pattinson has held some positions, like TPG, New Hope, and Brickworks, for a long time. But it has been more active with many of its other positions, both buying and selling.
The investment company doesn't need to stick with exactly the same portfolio that has helped it make recent gains. It can decide to sell some well-performing positions and/or invest in new opportunities.
I think it's that ability to regularly change the portfolio that will help it adjust for the future, whether we're talking about the next 12 months or ten years.
I'm not thinking of the current portfolio as expensive because it can invest in cheaper businesses if it wants to.
Great dividend record
Capital growth isn't the only achievement of the business. It has grown its annual dividend per share every single year since 2000. Indeed, Sol Patts shareholders can also benefit from dividends while holding their shares for long-term capital growth.
Dividend growth isn't certain but it's one of the main aims of the business. With a useful and growing dividend, I think it's easier to hold Soul Pattinson shares for the long term, receiving dividends into the bank account while riding through any volatility. Certainly, I believe it's easier to think long term if we focus on long-term dividend growth.
Soul Pattinson's cash flow continues to grow and this helps it pay larger dividends to investors. At the current Soul Pattinson share price, the company has a grossed-up ordinary dividend yield of 3.4%.
