Some companies operate in very specific industries, whether that's a supermarket business, a retailer, or something else in an exact sector. But, a few S&P/ASX 200 Index (ASX: XJO) shares have operations spread across a wide array of areas, providing diversification.
One of the great things about having diversification within a company is that it lowers the risk of any one segment going poorly, and it also means the company has multiple avenues to pursue growth.
They can choose which area of their diverse operations they see as the best opportunity to invest for the biggest return.
With that in mind, I think the below two stocks are two of the most diverse ASX 200 shares.
Image source: Getty Images
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
I think this company, commonly called Soul Patts, is the most diverse business because it already represents a wholly diversified portfolio.
It started as a pharmacy business 120 years ago but has since made a number of investments in various other industries and assets.
For example, it's invested in Australian telecommunications, building products, coal mining, copper mining, uranium mining, industrial property, retirement living, swimming schools, agriculture, financial services, funds management, bonds/credit, ASX blue-chip shares, and ASX small-cap shares.
This diversified portfolio provides cash flow to Soul Patts, which then enables a resilient, growing dividend. It has paid a dividend every year since it was listed 120 years ago, and it has grown its annual ordinary dividend every year since 2000, which is the best record on the ASX.
Wesfarmers Ltd (ASX: WES)
Wesfarmers is another of the oldest businesses on the ASX. The ASX 200 share can trace its history back to 1914 as a Western Australian farmers' cooperative. It's now one of the largest Australian companies.
It has operations across home improvement, building supplies and outdoor living products (Bunnings), general merchandise and apparel (Kmart and Target), office and technology products (Officeworks), health, beauty and wellbeing products and services (Priceline), a retail subscription program, wholesale distribution of pharmaceutical goods, manufacturing and distribution of chemicals and fertilisers, a lithium project including mine, concentrator and refinery, industrial and safety product distribution, and gas processing and distribution (WesCEF).
The ASX 200 share has made Kmart and Bunnings two of the country's most impressive retailers, with market-leading positions in their categories.
Kmart is looking to grow its earnings by taking its Anko brand products to international markets, while Bunnings is looking to grow through bolt-on acquisitions (such as Beaumont Tiles) and growing in new product categories, such as auto care and pet care.
I think there's more growth to come.
