Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), also known as Soul Patts, shares may be the best ASX choice for retiree investors for FY27 and beyond.
Soul Patts is not as famous as names like Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), Westpac Banking Corp (ASX: WBC) or Woodside Energy Group Ltd (ASX: WDS). But, I think it's much more appealing.
The business operates as an investment conglomerate, meaning it owns stakes in a wide array of other businesses and assets.
There are a variety of reasons why Soul Patts could be an excellent stock to own in FY27 and beyond.
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Diversification
Plenty of retirees may have too much of their portfolio invested in a limited number of ASX bank shares, ASX mining shares and Australian property. As a result, they're not very diversified.
Soul Patts owns a diverse portfolio that is spread across a number of areas including energy, resources, telecommunications, financial services, agriculture, water entitlements, swimming school, retirement living, industrial property, credit and plenty more.
Australia is a wonderful country to do business in, but there are a variety of investments we can get exposure to, which Soul Patts can provide for investors.
One of the main benefits of the Soul Patts investment model is the business has a flexible mandate to buy and sell assets in virtually any sector. It's also increasingly looking at expanding its portfolio to overseas investments.
We get diversified investment exposure by just owning shares of this business.
Reliable dividend
The business has the best record in terms of dividend growth, in my view. That's very attractive for retirees.
It's not growing its dividend at the fastest pace in the world, but it has the longest ASX record for annual dividend increase.
Soul Patts has increased its regular annual dividend every year since 1998, so we're approaching three decades of dividend growth.
The business is able to grow its dividend so consistently thanks to a few reasons.
First, it's largely invested in defensive assets, which provide resilient cash flow in all economic conditions.
Second, most of its investments are in businesses (listed and unlisted) that are delivering earnings growth themselves, helping generate more cash flow for Soul Patts to fund larger dividends.
Third, Soul Patts consistently retains some of its investment cash flow each year to invest in more opportunities. That healthy dividend payout ratio is why the business only has a grossed-up dividend yield of 3.3%, including franking credits, at the time of writing.
Capital growth
Soul Patts also has a good track record of delivering long-term capital growth for shareholders thanks to the growing underlying value of the portfolio and steady investments into new ideas.
Share price growth is not guaranteed, of course, but over the past five years, the Soul Patts share price has risen 42%, at the time of writing.
Overall, I think this ASX share has a lot to offer retirees, though it's not the only good option out there.
