Many ASX investors deploy capital into stocks to maximise their portfolio's capital growth potential. Others will only buy an ASX stock if it has the potential to pay large dividend income, preferably fully franked.
There's nothing inherently wrong with growth or dividend investing. Solely pursuing these avenues may suit your personal circumstances to a tee. However, when I buy ASX stocks, my ideal company offers both capital growth potential and hefty dividend income.
That's why I own shares of Washington H. Soul Pattinson and Co Ltd (ASX: SOL).
Washington H. Soul Pattinson, or Soul Patts for short, is an ASX 200 dividend stock that has been on the ASX for more than a century. It is an investing house that manages a portfolio of underlying assets on behalf of its shareholders, similar to a listed investment company (LIC).
A big chunk of this portfolio consists of large holdings in a diversified swathe of blue-chip ASX stocks, many of them dividend payers. Some of the largest stocks in this portfolio include BHP Group Ltd (ASX: BHP), Macquarie Group Ltd (ASX: MQG), Westpac Banking Corp (ASX: WBC), and Wesfarmers Ltd (ASX: WES).
But Soul Patts' investment portfolio's largest division is its 'strategic portfolio'. This houses major chunks of a select group of ASX stocks. These include a 43% stake in Brickworks Ltd (ASX: BKW), 39.2% in New Hope Corporation Ltd (ASX: NHC) and a 12.8% holding in TPG Telecom Ltd (ASX: TPG).
So, is this ASX dividend stock a pick for both growth and income? Well, quite simply, Soul Patts has been delivering healthy portions of both for decades.
An ASX dividend stock with growth potential?
First, let's talk about dividends. Soul Patts has the best dividend streak on the ASX. It has just announced its 24th annual dividend pay rise for shareholders in a row. Yep, this company has upped its annual dividend every single year since 2000, a feat unmatched on the entire ASX.
The company may have a paltry-looking 2.68% dividend yield today (albeit fully franked). But the longer an investor has held this stock, the higher that yield-on-cost would be.
Secondly, let's discuss growth. In its recent full-year earnings report, Soul Patts confirmed that its investors have enjoyed a total return (share price growth plus dividends) of 11.7% per annum over the past 20 years, beating out the broader market by 3% per annum.
The company has also managed an average return of 12.2% per annum over the past five years and 12% per annum over the past ten.
Now, those metrics don't guarantee that investors in this ASX dividend stock will continue to enjoy those market-crushing returns. But I think track records matter in investing, particularly over long periods of time. And Soul Patts has clearly found a formula that works.
Soul Patts is a major holding in my portfolio because it is an ASX rockstar stock that has delivered dividends and growth. It doesn't get much better than that.
