Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) recently announced its FY26 half-year result. After seeing the financials and commentary, a number of reasons stuck out about why Soul Patts shares are still a great pick.
In the short-term, market confidence is being tested by events in the Middle East and the subsequent impacts. But, in the long-term, there are plenty of great reasons to like the business. It's already one of my largest holdings and I'm planning to buy more because of the following reasons.
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Ever rising dividend
One of the best attributes for Aussie investors is the passive income from this ASX share. It has increased its payout for 28 years in a row!
The business decided to increase the interim dividend per share by around 9% to 48 cents per share. Soul Patts was able to fund that dividend announcement thanks to a 12.5% increase in the net cash flow from investments (NCFI) to 89 cents per share. Impressively, the NCFI has increased at a compound annual growth rate (CAGR) of 9.1% over the prior three years.
The business could continue to deliver rising dividends for shareholders over the long-term thanks to its sturdy and expanding portfolio.
At the current Soul Patts share price, it offers a grossed-up dividend yield of 3.8%, including franking credits.
Improving portfolio balance
In the last few years, the business has been looking to protect capital through increased diversification and uncorrelated returns. It's looking to seek out mis-priced risk and it's prepared to be counter-cyclical or contrarian.
The idea is that its capital is invested in the highest-conviction ideas, while balancing growth and yield within the business.
Areas of its portfolio that it has been putting a significant portion of new investing money in recent times has been 'real' assets, private equity, emerging companies and credit.
Real assets include things like industrial and manufacturing properties, data centres, land for development, agriculture, water rights and retirement living.
The private companies are long-term investments in unlisted companies with growth opportunities. Soul Patts has the ability to hold minority, majority or control these investments, helping them grow into long-term growth platforms.
The emerging companies segment relates to investments in high-growth companies with structural tailwinds and potential capital gain potential. It has an increasing exposure to global investments in this segment.
With the credit segment, it's looking to invest in businesses targeting income and strong risk-adjusted returns across domestic and global credit markets.
I like that the company is reducing its reliance on significant investments in large, listed businesses and building out its portfolio into other areas.
Focus on defensive growth
The business has deliberately built its portfolio to balance growth, yield and resilience across a range of industries and asset classes.
Looking at the past 25 years of ASX down months, Soul Patts has outperformed the ASX share market on average by 1.9%, which is an impressive track record and part of the reason why it has been able to outperform the S&P/ASX 200 Index (ASX: XJO) over the long-term.
Soul Patts noted in its recent result that its HY26 net asset value (NAV) return was 9.7%, outperforming the market by 6.6%. The 12-month NAV return (including dividends) was 14.3%.
Pleasingly, the NAV has compounded by 11.1% per year over the last three years (adjusted for dividends). While that's not the fastest growth rate in the world, it is helping justify a long-term rise in the Soul Patts share price.
