Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is a highly-regarded ASX dividend share.
This business is commonly called Soul Patts – the full name is a bit of a mouthful. Soul Patts is an ASX dividend share that's rated as a buy by the Motley Fool Dividend Investor service. Indeed, it has been rated as a buy for years.
An overview of Soul Patts
Soul Patts is an investment conglomerate. That wasn't always the case – it first listed in 1903 as a pharmacy business – that's where the Soul Pattinson chemist chain name comes from.
However, it has evolved into a diversified investment house with a variety of different listed and unlisted holdings.
It made investments into TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW) and New Hope Corporation Limited (ASX: NHC) when they were much smaller businesses. Now those holdings are three of the biggest Soul Patts investments.
Soul Patts owns stakes in other listed businesses like Palla Pharma Ltd (ASX: PAL), Clover Corporation Limited (ASX: CLV), Australian Pharmaceutical Industries Ltd (ASX: API) and Magellan Financial Group Ltd (ASX: MFG).
The investment house also has the flexibility to invest in unlisted private businesses. It has investments in things like resources, swimming schools, financial services, agriculture and a business called Ampcontrol.
The ASX dividend share aims to invest in businesses for the long-term, sometimes with a contrarian investment style.
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.
How does Soul Patts fund its dividends?
Soul Patts receives investment income as its listed holdings pay dividends to it, and its unlisted holdings pass on profit up to it as well. Soul Patts receives interest as well.
The investment house then pays its dividend to shareholders from some of that cashflow, after paying for its operating expenses.
In FY20 Soul Patts said that its net cash flow from investments went up by 48.8% to $252.3 million, mostly thanks to a large special dividend from TPG. Its FY20 dividend amounted to a dividend payout ratio of 56.93% of those net cashflows from its investments. The rest of the profit can be re-invested into other opportunities.
Dividend record
Soul Patts has actually increased every year since 2000, including through COVID-19, which is the longest consecutive dividend growth record on the ASX. The investment conglomerate claims it has actually paid a dividend every year since it listed in 1903, including through world wars, the great depression, the Spanish Flu and various recessions over the decades.
Dividend outlook
Two of Soul Patts' key leadership provided some helpful quotes about the outlook and the future dividend.
Managing director Todd Barlow said: "The outlook for the domestic and global economy remains uncertain and volatile. One of WHSP's key advantages is a flexible mandate to make long-term investment decisions and adjust the portfolio by changing the mix of investment classes over time. While the economic outlook is uncertain, we can be certain there will be some dislocation in a number of asset classes. With dislocation comes opportunity and WHSP is well positioned with adequate liquidity to take advantage of the right investment opportunities."
WHSP chair Robert Millner said: "Our aim is to pay a stable and growing dividend year on year. During the GFC many companies cut their dividends while WHSP was able to increase dividends and we are seeing the same thing occur this year as a result of our diversified portfolio and long-term investment decisions…We are proud of the fact that WHSP has not missed paying a dividend since it listed in 1903."
