If I could only invest in one ASX share this week I think would pick Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).
A quick overview
Soul Patts is an investment conglomerate that has been around for over a century. It has actually been listed since 1903, so it's one of the oldest businesses in Australia.
The ASX share has been served by a number of families as employees for the long-term. More than 40 employees have worked for the company for over 50 years. Five generations of the Pattinson family have served the company, as have three generations of the Dixson, Spence, Rowe and Letters families.
It's now invested in a wide variety of industries such as telecommunications, property, building products, pharmacies, resources and so on.
Why I'd buy it now
There is currently a lot of uncertainty in the market with things like COVID-19, the US election and the unstable global economy. It's hard to know where to invest. But I think it would be a mistake to just sit in cash for the long-term. It is impossible to know what share markets will do. Even if they drop, how are you supposed to know where the 'bottom' is? It may be best just to stay invested and keep investing regularly.
Over the long-term shares have delivered good returns when you look at the long-term average returns. The long-term return numbers include the crashes and recessions.
However, acknowledging the long-term performance of shares doesn't mean that every single ASX share is a buy at any price. It's important not to overpay for businesses. That's a big part of investing.
I believe that Soul Patts can provide a good balance between being positive about the long-term future and being cautious about the current conditions.
The investment conglomerate owns defensive businesses and it's willing to invest with a contrarian style. So it can take advantage of negative market movements by buying (parts of) businesses. If the market goes up then Soul Patts can benefit from that too, and keep operating as normal.
Current investments
It owns a portfolio of listed ASX shares as well as unlisted businesses. I quite like its existing portfolio, though I'm also thinking (positively) about how the portfolio will evolve over the coming decades.
Some of its biggest equity holding are: TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), Australian Pharmaceutical Industries Ltd (ASX: API), Clover Corporation Limited (ASX: CLV) and Milton Corporation Limited (ASX: MLT).
Its unlisted business investments include swimming schools, resources, agriculture and Ampcontrol.
There is also a plan for an investment into a new sector. Data centres are in heavy demand right now – just look at Nextdc Ltd (ASX: NXT) – and Soul Patts is planning to invest in regional data centres.
I think regional data centres make a lot of sense for the ASX share. There was a sizeable shift to cloud IT infrastructure before COVID-19. The COVID-19 conditions have seemed to accelerate this shift. People in regional cities also need high-quality access to cloud infrastructure, so Soul Patts could be ahead of the curve by investing in this area.
Dividends
In the current investing world, it's hard to find a good source of dividends. Banks are cutting dividends and miners are trading at cyclical highs. I think it's best to buy miners when the market is pessimistic not optimistic.
Soul Patts is a great option for dividends in my opinion. It has grown its dividend every year since 2000. That's a really good record. The ASX share aims to increase its dividend in the upcoming result and I'm sure the company will want to continue that growth record after that.
Not only is the Soul Patts dividend growing, but it's also retaining some of its annual cashflow to invest in new opportunities (like regional data centres). Its existing investments and new opportunities will help grow its cashflow and fund bigger dividends in the future.
Foolish takeaway
At the current Soul Patts share price it offers a grossed-up dividend yield of 4.1%. I think it's a good, defensive business which can safely navigate whatever happens next. I'd be happy to buy a parcel of shares for the long-term today.
