This week I became even more confident about Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). I think the Soul Patts share price looks even better because it’s expanding into a new industry.
According to reporting by the Australian Financial Review, Soul Patts is going to expand into data centres. It could be a very good move considering the current coronavirus conditions may make more people work from home permanently.
Soul Patts is not doing it alone, it’s taking a “significant” stake and help Leading Edge Data Centres grow.
The idea is to build smaller data centres in regional locations like Newcastle, Albury and Coffs Harbour. There’s a lot of data centre competition in the capital cities, but the regional areas also need the services and advantages provided by data centres.
It could even turn into a positive self-fulfilling loop. If the regional areas have the technology to support high-tech work then more people could move there and away from the congestion and high cost of living in those capital cities.
According to the AFR, Soul Patts believes that Leading Edge has the right relationships, sites and configuration to make a profitable go at the venture.
Why does this make me more confident about the Soul Patts share price?
The Soul Patts share price has been a good performer over the decades. The investment house’s current largest holdings are businesses like TPG Telecom Ltd (ASX: TPM), New Hope Corporation Limited (ASX: NHC) and Australian Pharmaceutical Industries Ltd (ASX: API). These businesses may generate good dividends for Soul Patts but there’s not going to be a lot of growth.
Those investments started off as small holdings and grew. Brickworks Limited (ASX: BKW) has a bit more growth potential but it’s going to be these new, smaller investments that drive future growth for Soul Patts.
I’m not just investing at today’s Soul Patts share price with only today’s investments in mind, but I’m thinking about the way the company will pivot towards growth and new industries in the coming years. That ability to regenerate the portfolio means Soul Patts can keep making good returns over the very long-term.
Foolish takeaway
At this share price Soul Patts offers a grossed-up dividend yield of 4.8%. I think we can be well rewarded for holding the company for the long-term with a very reliable growing dividend. I’d be very happy to buy some shares at this price.
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Returns as of 7/4/2020
More reading
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- 2 ASX shares I’ll hold until I’m 100
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- Why high dividend paying ASX shares are still the best way to secure a regular investment income
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Motley Fool contributor Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The post Why I’m even more confident about the Soul Patts share price appeared first on Motley Fool Australia.
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