Why I invested $3,000 into this great ASX share last week

I’ve been busy in the ASX share market during this volatility. There’s one stock I’ve put $3,000 into. That business is none other than Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).

Regular readers will know how much I admire this business. It’s an investment conglomerate that has been operating for 120 years.

It started out as a pharmacy company, but has since divested that a business which is now owned by Wesfarmers Ltd (ASX: WES). There’s a lot to like about Soul Patts right now, which is why I’m especially pleased that I invested at a lower price than it’s currently trading at.

Defensive and good cash flow

Soul Patts has deliberately built its portfolio to be defensive and focus on ones that can provide reliable cash flow through the economic cycle.

The business is invested in areas like telecommunications, swimming pools, agriculture, financial services, credit, electrification, resources, industrial property and plenty more.

By having a diversified portfolio, the business is exposed to a variety of opportunities and risks, but this also means its portfolio’s assets are largely uncorrelated to each other.

The sectors it’s invested in are good options for cash flow, which can help fund a growing dividend (a key attraction for me) and can also be put towards additional investments.

Recent investments include taking over Brickworks, agriculture and water entitlements, acquiring the rest of Ampcontrol (the electrification business), and reportedly investing in a fast-growing US coffee shop.  

The ASX share has energy investments

The ASX share market is seeing volatility amid the oil price pain, but there are a few businesses that are rising likely because of the market view of where energy prices could go.

Soul Patts is invested in the coal miner New Hope Corporation Ltd (ASX: NHC), which is capable of producing big dividends when the coal price increases. New Hope currently plays an important part in funding the Soul Patts dividend because the investment conglomerate is a large minority shareholder of New Hope.

The business is also invested in the Canadian-based uranium miner Nexgen Energy (ASX: NXG). This business could make very pleasing levels of cash flow once the project is fully operational, though that could take several years. It’s also possible that further uranium deposits could be identified and utilise the existing mine infrastructure.

Dividend yield

While the consistently growing dividend is the most appealing part of the passive income picture, I think the dividend yield is a solid starting point too.

My estimate for what annual dividend it will pay in FY26 puts the projected grossed-up dividend yield at 4%, including franking credits, at the time of writing.

Overall, I think the ASX share has an attractive future. That’s why I was happy to invest $3,000 at a slightly lower lower valuation than its trading at today.

The post Why I invested $3,000 into this great ASX share last week appeared first on The Motley Fool Australia.

More reading

• New Hope shares crash 12% on profit crunch and big dividend cut
• New Hope Corporation 1H FY26: Profit falls, interim dividend declared
• 3 legendary ASX dividend shares worth a closer look
• Here’s why ASX 200 energy shares were the only risers last week
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Tristan Harrison has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited and Wesfarmers. The Motley Fool Australia has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.