Every year that goes by makes the ASX share Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) more appealing to me.
The investment house regularly adds to its portfolio, which helps improve the quality of the business and increase its long-term prospects.
For example, it recently announced that it was selling its stake of a property investment trust worth $1.9 billion. Management said that this transaction will provide an opportunity for Soul Patts to reallocate capital toward opportunities it's seeing across domestic and international markets.
This move could help the growth trajectory of the portfolio with the investments it makes with its new war chest. It's looking at both local and international investments.
There are three areas that make me think this ASX share could be a good buy today.
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Diversification
Plenty of investors just want to invest in quality options that provide good diversification and deliver solid returns. That's partly why exchange-traded funds (ETFs) are so appealing to a lot of Aussies, allowing them to track the market.
Soul Patts has a diversified portfolio across a number of industries, including resources, telecommunications, financial services, building products, property, agriculture, water entitlements, swimming schools, electrification, credit and plenty more.
By owning this investment, investors can get access to a diversified portfolio through just one holding.
With its steadily adjusting portfolio over time, I think this company can future-proof itself and continue its excellent longevity. It's already more than 120 years old.
Passive dividend income
In multiple ways, Soul Patts is the ultimate ASX dividend share, making it a great choice for passive income.
The company has paid a dividend every year in its listed existence, including through the world wars, global pandemics, economic recessions, various Prime Ministers and so on. Nothing has stopped that passive income flowing. It's not guaranteed, though, of course.
Soul Patts also has the record for the longest continuous dividend growth streak on the ASX. It has hiked its regular payout every year since 1998, so it's approaching 30 years of non-stop dividend growth.
It pays its dividend from the investment cash flow from its portfolio of shares, property, credit and private businesses. Soul Patts usually has a reasonably generous dividend payout ratio, but it still retains a material amount of its cash flow each year to invest in opportunities.
The cash flow growth can come from a combination of the organic growth of its own investments, as well as additional investments over time.
The only thing that doesn't stand out as much is the dividend yield – at the time of writing it has a grossed-up dividend yield of 3.5%, including franking credits.
Capital growth
Some investors may be more focused on capital growth than dividends or diversification.
Soul Patts is not a high-flying AI company, but it's the sort of business that has been able to provide steady compounding thanks to the growth in the value of the portfolio.
Over the last five years, the Soul Patts share price has risen 41%, at the time of writing. Past performance is not a guarantee of future returns of course, but I wouldn't be surprised if it delivered a similar (or better) return over the next five years.
I'm seeing the business shift its portfolio towards a more growth-orientated focus, which I think will be a big positive for the longer-term returns.
As the years go by, I think it's becoming more attractive as an investment for capital growth.
When combined in a portfolio with other attractive ASX shares, I think it's a very good buy today.
