The Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) share price has fallen 7.6% on the ASX 200 so far this year. Does this put it in the buy zone?
We take a closer look at the Aussie investment company known as 'Soul Patts' and whether it might make a good addition to your investment portfolio this year.
What does Soul Patts do?
Soul Patts is an investment company with investments in a diverse portfolio of assets. Along with investing in cash, term deposits, corporate debt and equities, the group has assets in energy, minerals and property.
How has Soul Patts been performing?
Currently on a price-to-earnings (P/E) ratio of 15.21x, Soul Patts trades on a discount when compared to the ASX 200 overall. Earnings appear to be growing with net profit after tax for the half year ended January 2019 up 22.6% on the same period in 2018.
The company offers a grossed-up dividend yield of 3.5% and has increased dividends every year since 2012 following its recovery from the post GFC fallout. Indeed, in its half-year report to 31 January 2019, management reaffirmed their intention to grow capital and dividends. All of this growth is good news for shareholders and makes Soul Patts an attractive investment.
A wealth of experience
Another point to mention about this company is its lengthy experience as an investment company. Washington H. Soul Pattinson and Co. listed on the ASX in 1903 and has been working to grow shareholders' funds ever since, an impressive track record. Someone who invested $1,000 in this company in 1979 and held until 2019 would have around $590,000 today. Not a bad return over 40 years, especially considering some of the stock market conundrums that occurred over this period.
Partly as a result of its reputation and past success, Soul Patts trades on a price-to-book ratio of 1.60. This is higher than most investment companies listed on the ASX. However, its valuation is justified when considering the history of the group and the quality of its underlying investments – Soul Patts is a substantial holder in a number of high quality companies across diversified sectors.
Another positive note about this company is that it has a debt-to-equity ratio of just 1.3%. This means debt is almost zero and therefore Soul Patts comes at a much lower risk than many other companies in the ASX 200.
Foolish takeaway
Washington H. Soul Pattinson is a successful investment company with a long track record. It has almost no debt and is growing earnings and dividends. I believe this is a good share to buy in 2019.
