Investing in companies is more than just buying stocks.
It's also about partnering with businesses that value their shareholders. If you think about it this way, how much better is it to partner with companies that treat their shareholders like royalty?
A solid dividend policy and track record are excellent indicators of a company's commitment to sharing profits directly with its investors.
Moreover, these dividend-paying companies not only offer consistent income to their shareholders but also showcase strong financial health and stability.
This article delves into two ASX-listed shares that exemplify strong commitments to their shareholders by assessing financial metrics such as payout ratios, franking credits, and dividend growth history.
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Washington H Soul Pattinson & Company Ltd (ASX: SOL)
The first company that comes to mind is Washington H Soul Pattinson, also known as Soul Patts. The company stands as a testament to longevity and reliability in the Australian market.
Since its listing in 1903, this diversified investment house has consistently rewarded its shareholders with dividends, highlighting its commitment to investor returns.
Soul Patts has paid dividends every year since its inception over a century ago. And it has increased its total annual dividends for 24 consecutive years since 2000 at a compound annual growth rate (CAGR) of 9.6%. Notably, between FY21 and FY23, it boasted an impressive 18.5% CAGR in its dividend payment growth.
Over the last five years, its payout ratios have mostly moved between 50% and 60%. With a payout ratio hovering around 50%, Soul Patts strikes a balance between rewarding shareholders and retaining earnings for future growth.
Investors benefit from 100% franking on dividends, a policy that has been consistently maintained for the past two decades. These franking credits provide nice tax benefits to investors.
The good news is Soul Patts shares are attractively valued after their recent fall, as my colleague Tristan highlighted.
The Soul Patts share price was $32.39 at the close of trade on Friday, near its price a year ago after a recent decline. It offers a fully franked dividend yield of 2.8%.
Steadfast Group Ltd (ASX: SDF)
Steadfast is a premier insurance brokerage network in Australasia, offering a comprehensive range of insurance and risk management services.
Since its initial public offering (IPO) in 2013, Steadfast has demonstrated strong dividend growth, increasing its annual dividend payments from 4.5 cents per share (cps) to 15.75 cps in the last 12 months to March 2024. This growth reflects the company's solid earnings performance as well as its dedication to returning profits to its shareholders.
With a payout ratio of 76%, Steadfast ensures a substantial portion of its earnings is distributed to shareholders while keeping some for its future growth needs.
Like Soul Patts, Steadfast provides 100% franking credits on its dividends, making them particularly attractive to investors seeking tax-effective income streams.
Steadfast's impressive track record of dividend growth, combined with its high payout ratio and fully franked dividends, underscores its robust financial health and shareholder-friendly policies.
This makes Steadfast Group a compelling choice for investors seeking both income and growth potential in the insurance sector.
Using S&P Cap IQ data, Steadfast shares are trading at approximately 20x FY24's estimated earnings, which is inexpensive compared to its history and industry peers.
The Steadfast share price was $5.39 at Friday's close, down 7% year-to-date after surging almost 60% over the last five years. It offers a dividend yield of 2.9%.
