In these times of high share market volatility, it’s nice to have a few dependable shares to ground your portfolio. These are the defensive income earners that will chug along regardless of fluctuations in the broader economy. They may not light up your portfolio like some market darlings, but they won’t have you fearful of waking up to a sea of red if Trump tweets something controversial overnight.
They’re shares like Brickworks Limited (ASX: BKW) and Washington H Soul Pattinson and Co. Ltd (ASX: SOL). While both companies took a hit during the COVID-19 market crash in March, they have steadily rebounded. To the point where their share prices are now within striking distance of respective 52-week highs.
But the main reason to invest in both companies is their ability to generate income. Soul Pattinson has increased its dividend every year for the past 22 years (including during the GFC). And 2020 has been no exception. Its interim dividend rose 4.2% year-on-year to 25 cents per share, fully franked.
Similarly, Brickworks boosted its interim dividend by 5% to 20 cents per share. Incredibly, Brickworks has either maintained or increased its dividend every year since 1976.
So, what do these companies do?
Soul Pattinson is a diversified investment company. It has significant holdings in telecommunications, through a 25% stake in TPG Telecom Ltd (ASX: TPG). It’s also invested in healthcare, mining and energy. A number of its holdings are in other investment companies, including Bki Investment Co Ltd (ASX: BKI) and Milton Corporation Limited (ASX: MLT).
Brickworks, as the name suggests, started out making bricks. It remains Australia’s largest brick producer, but over the years has expanded into other areas, including property and investments.
Brickworks and Soul Pattinson are also intimately related. In addition to its other investments, Soul Pattinson owns a 44% stake in Brickworks, while Brickworks has a 39% stake in Soul Pattinson. Brickworks has said the dependable nature of the Soul Pattinson dividend has helped the company balance out cyclical earnings patterns in its building and property businesses.
Should you invest?
Absolutely. Both Brickworks and Soul Pattinson are ASX royalty. They pay consistent, generally increasing dividends, and are the ultimate ‘set and forget’ shares for your portfolio. In its June market update, Brickworks reported that it had delivered shareholder returns of 13% per annum over the last 44 years. If you had invested $1,000 in the company back in 1976, you’d be sitting on close to $260,000 today.
That sort of timeline might feel pretty abstract for younger readers, but it essentially means that if you entered the workforce 40 years ago, and parked your savings in Brickworks, you’d be enjoying a pretty lavish retirement right now. Let’s see how flavour of the month companies like Afterpay Ltd (ASX:APT) stack up against that in 40 years’ time.
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More reading
- ASX 200 Weekly Wrap: ASX 200 snaps 4 week losing streak… just
- 3 ASX 200 growth shares to buy right now
- 5 things to watch on the ASX 200 next week
- How to generate $1,000 a month in dividends
- Why I think the Brickworks (ASX:BKW) share price is a buy
Rhys Brock owns shares of Brickworks and Afterpay Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Afterpay Ltd. 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.
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