The Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) share price has grown by 22% over the past five years.
Soul Patts is an investment conglomerate that has been around for over a century.
Not long ago, Soul Patts management revealed the following numbers in its annual result:
- Regular profit after tax grew by 59.1%
- Net profit after tax grew by 123.3%
- Regular cash per share up by 4.5%
- Total dividend per share for the year grew by 3.8%
Bull case
Soul Patts management have proven to be shrewd and effective investors, hopefully that will continue to be the case.
Every six months management show how Soul Patts has performed against the All Ordinaries Accumulation Index. Over the past 15 years the average Soul Patts shareholder return per annum (with dividends re-invested) has been 12.8%. The All Ordinaries Accumulation Index has returned an average of 8.9% per annum.
Another advantage of investing in Soul Patts is getting an indirect piece of many growing businesses at a discounted price. On 31 July 2017 the Soul Patts pre-tax net asset value per share was $18.66, whilst the share price was $17.64.
Every investor likes growing income and Soul Patts is one of the very best. It has grown its ordinary dividend every year since 2000.
Bear case
Several of Soul Patts' largest holdings are quite cyclical. New Hope Corporation Limited (ASX: NHC), Brickworks Limited (ASX: BKW) and Australian Pharmaceutical Industries Ltd (ASX: API) could all suffer in the near future and this would hurt Soul Patts.
The Soul Patts share price is a lot higher than it was earlier in the year. The share market could easily push the share price lower, back down to a lower level.
Foolish takeaway
Soul Patts is currently trading at 14x FY18's estimated earnings with a grossed-up dividend yield of 4.83%.
I think around $16 is a good price for most investors, but there could be an even more attractive price in the next year or two if Australia goes through a recession.
