The ASX dividend stock Washington H. Soul Pattinson and Co Ltd (ASX: SOL) is an exciting option for long-term passive income. I believe the business could pay really impressive dividends in the coming years with a $10,000 investment.
I'm not about to suggest that Soul Patts currently has a dividend yield of more than 30%, but I do want to show how the power of compounding can help grow a decent dividend yield into a huge payment in time.
As Albert Einstein once supposedly said:
Compound interest is the eighth wonder of the world. He who understands it, earns it, he who doesn't, pays it.
So, what makes this business a powerful compounder? For readers who don't know, Soul Patts is an investment conglomerate that owns a diversified portfolio of various assets, including large ASX shares, small-cap ASX shares, property, private equity, and bonds. It can invest wherever it sees opportunities.
Not only does the portfolio offer significant diversification, but the company is also one of the most impressive ASX dividend stocks because of its long-term growth in underlying value and dividend.
A passive income machine
Soul Patts has increased its annual ordinary dividend every year since 2000, which I think is a great record.
Dividend growth has accelerated in recent years – in the past three financial years, the payout has grown at a compound annual growth rate (CAGR) of 15.3%.
However, Soul Patts' current grossed-up dividend yield, including franking credits, is 3.9% using the annual payment from FY24.
A $10,000 investment would unlock $390 of annual passive income from the ASX dividend stock.
Past performance is not a guarantee of future performance, but if Soul Patts were to continue growing its dividend at a CAGR of 15% per year over the next 15 years, the annual passive income would grow to $3,173.
But, it may be too optimistic to expect the dividend to keep growing at that pace. If Soul Patts grew its dividend at a CAGR of 10% over the next 20 years, which would still be very good, it could grow to an annual dividend payment of $2,623.
Dividend growth is not guaranteed, particularly in the double-digit percentage range. But I think Soul Patts has a number of exciting investments that could help its portfolio returns. Some of those investments include ownership of Tuas Ltd (ASX: TUA) shares, Nexgen Energy (Canada) CDI (ASX: NXG) shares, and its private equity electrification business, Ampcontrol.
I have a high level of confidence that owning this ASX dividend stock could be very rewarding in the coming years.
