Can Soul Patts shares beat the market over the next 12 months?

One leading broker believes the investment house could deliver good returns.

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If you have room in your portfolio for some new additions, then it could be worth considering Washington H Soul Pattinson & Company Ltd (ASX: SOL) shares.

That's the view of analysts at Morgans, which rate the investment house very highly.

What is Washington H Soul Pattinson & Company?

Washington H Soul Pattinson & Company, also known as Soul Patts, started life as an owner and operator of Australian pharmacies.

Since then, Soul Patts has evolved into a diversified investment house investing across a range of industries and asset classes. This includes listed equities, private equity, credit, and property.

It has a proud history and highlights that it has never missed a dividend payment to its shareholders since listing all the way back in 1903. In addition, it has delivered increasing dividends every year of this century.

And while its returns over the last three years have been disappointing, this hasn't stopped Soul Patts' shares from delivering an average 10% per annum return over the last decade.

The good news is that Morgans believes that the latter can continue for the foreseeable future. As a result, the broker currently has the company on its best ideas list. Its analysts commented:

SOL's investment portfolio includes a diversified pool of assets ranging from listed equities (both large cap and emerging companies), private equity, property and structured yield. On a 20-year horizon, SOL's annualised TSR is 12.5% vs the All Ords accumulation index of 9%. SOL has a 20-year history of increased dividend distributions, with a 20-year CAGR of c.8%. In our view, SOL's management team continues to deliver both organic and inorganic growth over the long term. We continue to like the SOL story, particularly its track record of growing distributions.

Buy Soul Patts shares

Morgans believes that investors buying the company's shares at current levels could get an above-average total return over the next 12 months.

Its analysts have put an add rating and $35.60 price target on the investment house's shares. Based on its current share price of $32.36, this implies potential upside of 10% for investors between now and this time next year.

In addition, the broker is forecasting fully franked dividends of 94 cents per share in FY 2024 and then $1.05 per share in FY 2025. If this proves accurate, it will mean dividend yields of 2.9% and 3.2%, respectively.

This boosts the total potential 12-month return from Soul Patts shares to approximately 13%.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Washington H. Soul Pattinson and Company Limited. 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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