Brickworks Limited (ASX: BKW) shares represent one of the larger positions in my portfolio. I'm going to tell you why I really like it.
Before we get to that, I'll say that Brickworks is one of the older businesses on the ASX having been listed several decades ago. Back then it was one of Australia's largest brickmakers and has remained that way ever since.
But, it has since expanded into other building product categories like roofing, masonry and cement.
It's the other parts of the business that I really like owning it for.
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Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) stake
Brickworks owns a 26.1% stake in the old investment house Soul Pattinson. This is currently worth around $3.1 billion after the recent gains of the Soul Pattinson share price.
There has been a cross-holding between the two businesses for decades, which has provided protection against any corporate raiders.
The Soul Pattinson earnings, dividend and share price have provided stability and growth for Brickworks over the long term.
Soul Pattinson is invested across a number of different areas including telecommunications, property, resources, agriculture, swimming school, financial services and so on.
Every year Soul Pattinson diversifies its portfolio a little more, improving the benefit of diversification for the company. Soul Pattinson has increased its annual ordinary dividend every year since 2000, which is the longest record on the ASX, which Brickworks can then utilise to pay dividends to shareholders.
Property
Brickworks owns half of two property trusts with partner Goodman Group (ASX: GMG).
The main property trust is the industrial property trust. Brickworks sells excess land it no longer needs into this trust, then Goodman prepares the land for construction of large, advanced warehouses which can generate enormous rental income. This improvement of the land also results in impressive development profits.
Some of the recent large property projects have been for Amazon, Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW).
The other trust is the Brickworks Manufacturing Trust which is a portfolio of some of the properties utilised by Brickworks' building products divisions. In 2022 the creation of this trust, and the sale of half of it, led to Brickworks unlocking some of the value of the underlying land.
Over time, some of the Brickworks Manufacturing Trust properties may be developed into warehouses, which could boost Brickworks shares further.
Brickworks also has 100% interest in over 5,000 hectares of operational and surplus land across Australia and North America. This could drive future developments, rental growth and capital growth for the property trust and Brickworks.
The ASX share has suggested that the current rent of $178 million could grow to more than $275 million within approximately five years as construction is completed and rental renewals occur at higher rates.
Brickworks' current share of the property trust assets is $2.2 billion.
Dividends from Brickworks shares
I'd rate Brickworks as one of the best ASX dividend shares around. Its normal dividend has been maintained or increased every single year since 1976, which is a great record. It has also grown its dividend each year since 2014.
I don't think the dividend is going to shoot higher, but has been steadily climbing, which is attractive.
At the current Brickworks share price, it has a trailing grossed-up dividend yield of 3.5%.
