The ASX dividend stock Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) could be the most appealing way for retirees to receive income. I'd rank it above receiving the Age Pension.
The business is one of the oldest on the ASX, it has already displayed excellent longevity characteristics to succeed through world wars, global pandemics, global recessions and so on.
It started life as a pharmacy business and has evolved into a diversified investment house, which is one of the reasons why I think it's such an effective choice for dividend income. Let's get into the reasons why it's so compelling, in my view.
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Regularly growing dividend income
I think one of the main reasons to prefer Soul Patts shares over the Age Pension is that its dividend income has been very reliable and grown faster than inflation.
The business has increased its regular annual dividend per share every year since 1998. This shows it has been incredibly reliable for shareholders over the last three decades.
Over the last five years, the ASX dividend stock has increased its payout at a compound annual growth rate (CAGR) of 11.9%. The company increased its FY27 interim dividend by 9.1% to 48 cents per share.
Dividend growth isn't guaranteed, of course, but the business has a strong track record of rising payouts, and it's one of its key goals.
The current forecast on Commsec suggests the business could increase its FY26 annual payout by more than 11% to approximately $1.15. If that happens, the grossed-up dividend yield would be 3.7%, including franking credits, at the time of writing.
Impressively diversified portfolio
The investment house has spread its money across a variety of areas including listed companies, 'emerging companies', credit, private companies and 'real' assets (such as real estate, agriculture and data centres).
By spreading investments across a range of areas, the company can lower its risk and give investors exposure to a portfolio of compelling assets, rather than just one or two sectors like many S&P/ASX 200 Index (ASX: XJO) shares.
This diversification strategy also allows the business to look across industries and geographic markets for the best opportunities. I think the flexible mandate helps generate the best returns over the long-term.
Capital growth
Another reason to prefer owning Soul Patts shares is that its portfolio has steadily increased in value over time as its existing investments have grown and it has made additional purchases.
This reflects growth in the net asset value (NAV), which is also strongly correlated with growth in the Soul Patts share price.
Over the last four years, Soul Patts' share price has risen by roughly 70% (at the time of writing). I'm not expecting the same performance over the next four years, but it shows the kind of return Soul Patts can deliver.
Match the Age Pension
The Age Pension will soon increase, but at the time of writing, the maximum a single Australian can receive is approximately $31,200 per year on an annualised basis.
If the business does pay $1.15 per Soul Patts share in FY26, that would require 27,131 shares based on the FY26 payout. However, I expect the FY27 payout will be larger, so we won't need as many shares in FY27 to achieve $31,200 in annual dividends.
