If I had to own only one ASX 200 share forever, this would be it

This is one of my portfolio's biggest positions.

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The S&P/ASX 200 Index (ASX: XJO) share Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is a stalwart in my portfolio, and I expect to own it for the rest of my life.

Soul Patts is an investment house that has been listed since 1903, making it one of the oldest companies on the ASX.

It started as a chemist with 21 pharmacy stores, but it's now a very different business. Incredibly, Soul Patts has been managed by the same family from the start – Robert Millner is the fourth generation of the family to chair the company.

Being old doesn't automatically make it a compelling investment, though longevity is a useful characteristic for a long-term investment. It means I can confidently hold the ASX 200 share for a long time.

Three factors really matter to me about this business.

Diversification and investment flexibility

Diversification is appealing because it lowers the risk to the Soul Patts portfolio if a particular investment goes wrong.

The portfolio is invested in multiple industries and asset classes, including ASX blue-chip shares, ASX small-cap shares, private businesses, property, and credit/bonds.

In terms of individual ASX companies, some of its main investments include Brickworks Limited (ASX: BKW), New Hope Corporation Ltd (ASX: NHC), TPG Telecom Ltd (ASX: TPG), Tuas Ltd (ASX: TUA), BHP Group Ltd (ASX: BHP), Macquarie Group Ltd (ASX: MQG), CSL Ltd (ASX: CSL), Goodman Group (ASX: GMG) and Wesfarmers Ltd (ASX: WES).

Other areas it's invested in include agriculture, resources, financial services, retirement living, swimming schools, electrification and more.

I like that the business has the flexibility to invest almost anywhere, opening up lots of opportunities for the company to find the best investment.

Re-investment

One of the most substantial financial moves that can help an ASX 200 share deliver long-term returns is the re-investment of profit back into itself for more growth.

With Soul Patts, there's a double layer of re-investment occuring. The investment house's portfolio of companies are re-investing inside their own businesses. Soul Patts doesn't need to do anything for Wesfarmers, Goodman and Brickworks to invest in and grow their operations.

On top of that, Soul Patts receives dividends and distributions from its portfolio of assets. After paying for its costs and sending a majority of the net cash flow to shareholders as a dividend, Soul Patts re-invests some of that cash flow into more opportunities, adding more financial power to the snowballing effect of growth.

Growing dividends

The ASX 200 share has grown its annual ordinary dividend every year since 2000, the longest streak of consecutive dividend increases on the ASX.

Dividend hikes aren't guaranteed, but it's nice to know that there's a good chance next year's dividend payment will be larger than this year's.

In the FY24 first-half result, Soul Patts increased its interim payout by 11.1% after its net cash flow from investments increased by 6.9%.

It currently has a grossed-up dividend yield of around 4%.

I like that I can own Soul Patts shares and receive dividends, meaning I don't need to sell shares to capitalise on the growth it's generating.

Motley Fool contributor Tristan Harrison has positions in Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks, CSL, Goodman Group, Macquarie Group, Washington H. Soul Pattinson and Company Limited, and Wesfarmers. The Motley Fool Australia has positions in and has recommended Brickworks, Macquarie Group, Washington H. Soul Pattinson and Company Limited, and Wesfarmers. The Motley Fool Australia has recommended CSL and Goodman Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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