The ASX share Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is the biggest position in my portfolio and I can see myself buying even more of it in the months and years ahead.
For those that don't know, Soul Patts is an investment conglomerate that has been operating for over 120 years. It started as a pharmacy business and has since diversified into numerous other sectors through both investments in ASX shares and its own private equity investments.
Diversification is a great strategy when it comes to investing, though it's not the main reason I like this business. I think it's great that it's invested in industries like telecommunications, resources, financial services, swimming schools, agriculture and plenty more.
Let's get into my three reasons why I like this ASX share so much.
Good passive income with payout growth
Over time, I hope that the dividends from my portfolio will be able to fund the expenses of my life. That's why I want to have a number of high-quality ASX dividend shares in my portfolio which can grow their payouts whilst offering good levels of passive income today, if I wanted to access that cash flow.
Soul Patts recently reported its FY25 half-year result which included an interim dividend hike of 10% to 44 cents. This means the last two dividends declared by the company comes to a grossed-up dividend yield of 4%, including franking credits. That's a solid starting yield, in my book.
Impressively, the business has grown its annual ordinary dividend every year since 2000, which is the best record on the ASX in terms of consecutive annual dividend increases.
It's not guaranteed Soul Patts will grow its dividend every year forever, but it's clear the intention is to grow it annually for the foreseeable future.
Capital growth
I like that there are multiple ways that Soul Patts' portfolio value can grow in the long term.
Firstly, the ASX share has a portfolio of investments that can grow in value themselves by increasing their profits and cash flow.
The second way relates to Soul Patts' cash flow that it receives from its portfolio (mostly in the form of dividends). Soul Patts pays out a majority of the cash flow as a dividend to investors and retains the rest to reinvest in more opportunities to boost the growth potential of its portfolio.
Some of its recent investing dollars has been focused on areas like agriculture and swimming schools, which are part of its private equity portfolio.
With those two capital growth forces combining, I think the ASX share can continue delivering capital growth over the long-term.
Ability to hold forever?
It's advantageous to be able to hold an investment forever. It means making fewer investment decisions, it means less brokerage costs and it'd certainly mean not activating a capital gains tax event.
I also like the idea of being able to sit back and watch the dividends roll in year after year.
Soul Patts has already proven it can last for decades and I think it's very likely to be around in two decades from now.
With the investment flexibility that it has, the ASX share can future-proof itself by ensuring its portfolio is focused on growing businesses with a good long-term outlook.
