If you're keeping an eye on the Australian stock market, you're likely familiar with the fantastic companies, Brickworks Limited (ASX: BKW) and Washington H Soul Pattinson & Company Ltd (ASX: SOL).
Both companies boast strong, shareholder-friendly cultures and have a unique circular shareholding structure where they own each other's shares.
Brickworks, a renowned name in the building materials sector, has a history of consistent performance. Its diversified portfolio, including property and investments, provides a solid foundation for its earnings.
On the other hand, Soul Patts, with its investments spread across various industries such as telecommunications, mining, and agriculture, presents a unique proposition for investors looking for wide-ranging exposure.
Now, the big question is, if you had to pick just one company to invest in, would you go for Brickworks or Soul Patts shares today?
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Financial health
Brickworks has consistently maintained a robust balance sheet with low debt levels. As at December 2023, Brickworks has a net debt of $1.2 billion compared to equity of $3.48 billion.
This positions it well to navigate any economic downturns and capitalise on growth opportunities without the pressure of high-interest payments.
Soul Patts has a net cash position of $285 million compared to its equity of $9 billion. The company boasts a strong financial position, with diversified income streams providing a buffer against sector-specific downturns.
Growth outlook
Regarding growth prospects, both companies have demonstrated their capability to adapt and thrive.
For Soul Patts, the focus has been on strategic investments in industries with high growth potential. Its ability to identify and capitalise on such opportunities has historically resulted in impressive returns for shareholders.
Brickworks has been expanding its presence in the US, opening new avenues for growth beyond the Australian market. This international expansion could significantly impact its bottom line in the coming years.
In addition to the US potential, Brickworks is well-positioned to benefit from the ongoing shortages in industrial properties. The most exciting one for me is its land holdings in Western Sydney, but the company also owns many other parcels of land in Australia and the US.
Dividends
Soul Patts shares offer a dividend yield of 2.73% compared to Brickworks' 2.44%.
While the difference in yields is very little, Soul Patts has demonstrated faster dividend growth recently. Over the past five years, Soul Patts has raised its dividends at around 9% per year, higher than approximately 3% for Brickworks.
Which shares are cheaper?
The Brickworks share price appears slightly cheaper than Soul Patts on a price-to-earnings ratio (P/E) and price-to-book (P/B) ratio basis. Using FY25 earnings estimates by S&P Capital IQ:
- Soul Patts shares are trading at a P/E ratio of 24x and a P/B ratio of 1.2x
- Brickworks shares are trading at a P/E ratio of 19x and a P/B ratio of 1.1x
Foolish takeaway
While I like both of these ASX dividend shares for their stability and track records, my pick would go to Brickworks shares because they have a better growth prospect and slightly cheaper valuations today.
