The James Hardie Industries plc (ASX: JHX) share price is falling heavily today.

In morning trade, the building products company’s shares are down 11% to $28.49.

Why is the James Hardie share price falling?

Investors have been selling down the James Hardie share price today after the release of the company’s half year update.

For the six months ended 30 September, the company reported a 14% increase in sales to US$1,998.5 million and a 22% jump in net profit to US$330.5 million.

While strong on paper, its sales and profit growth has slowed from 19% and 34%, respectively, during the first quarter.

Nevertheless, James Hardie’s CEO, Aaron Erter, was pleased with the second quarter. He said:

I am proud to report that the James Hardie team has continued to deliver strong execution of our global strategy that produced record Q2 results. The team’s performance is reflected in strong Price/Mix growth in all three regions, including North America Price/Mix growth of +14%, Asia Pacific Price/Mix growth of +11% and Europe Price/Mix growth of +12%.

However, the company notes that over the past 45 days, it has seen a significant change to the outlook of housing market activity for the second half. As a result, management has downgraded its guidance for FY 2023. It explained:

Based on the challenging macro-economic conditions, and housing market uncertainty, management has adjusted the fiscal year 2023 Adjusted Net Income guidance range. The updated 2023 Adjusted Net Income guidance range is US$650 million to US$710 million, changed from the prior range of US$730 million and US$780 million, due to a decline in volume expectations. The comparable prior year Adjusted Net Income for fiscal year 2022 was US$620.7 million.

Share buyback announced but dividend scrapped

This morning James Hardie also announced a major share buyback. However, it will come at the expense of its dividend.

As part of its continued focus on deploying excess capital to shareholders, the company announced the replacement of its unfranked dividend with an on-market share buyback program to acquire up to US$200 million (A$309 million) of shares.

James Hardie CFO, Jason Miele, explained why the company is scrapping its dividend. He said:

Today we adjusted our Capital Allocation Framework to better match who we are: a growth company. The number one and primary focus of our Capital Allocation Framework is to invest in organic growth; our 5-year average Adjusted ROCE of 36% is proof that investing in our growth should be our number one use of capital.

Returning excess capital to shareholders via a share buyback rather than a dividend provides a growth company the optimal flexibility to ensure investment in organic growth is prioritized while maintaining financial strength and flexibility through cycles. Through these cycles we will target an average leverage ratio below 2.0x. Finally, today, we announce the replacement of our unfranked ordinary dividend with a share buyback program, which was approved by our Board of Directors for an amount up to US$200 million from today through 31 October 2023.

The post Why is the James Hardie share price crashing 11% today? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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Qantas Airways Limited (ASX: QAN) shares could get another boost if analysts at Macquarie are correct.

Airlines had a really tough time during the COVID-19 pandemic. There was a lot less demand for air tickets, so the airlines had to be supported with a lot of money.

But now things are looking a lot better for the sector, including Qantas.

Domestic travel is now back to pre-COVID levels, which is leading to airline profits jumping back towards 2019 levels. International travel is still recovering.

What’s Qantas going to do with all of the extra earnings that it has suddenly has? Macquarie may have the answer.

Share buyback?

According to reporting by The Australian, Macquarie believes the quicker-than-expected return to profit could mean that Qantas buys back up to $800 million of its shares through a share buyback. Dividends would then return, and it would begin paying tax again in the second half of FY24.

Macquarie thinks the ASX airline share can fund both its fleet renewal while also carrying out capital management for shareholders, meaning the buyback.

The newspaper reported that the broker said:

The operating conditions for Qantas are accommodating higher RASK (revenue per available seat kilometre) than we had anticipated considering tight capacity, in particular within international.

Whilst this operating environment is likely as good as it gets, with more capacity expected to see a RASK impact, it does mean that the near-term snap-back in earnings is much sharper than we had anticipated.

When will profit return to normal?

Qantas has already said that its domestic demand has returned to normal. However, the broker has projected that profit will normalise in FY24, though there will be economic issues for the airline to deal with.

Macquarie wrote:

At this point, we forecast the overall business to generate a 12.5% earnings before interest and taxes (EBIT) margin, which… supports around a $600m earnings benefit.

The broker noted that it won’t be until the second half of FY24 that Qantas starts paying tax again because of carried-forward tax losses.

Broker rating on the Qantas share price

Macquarie rates Qantas as outperform, with a price target of $7.05. That implies a possible rise of close to 17% on the current price of $6.04.

Even though the Qantas share price is up 15% over the past month, I believe there is more recovery in store for the airline, despite the higher oil price.

Demand remains strong, after a few years of COVID-19 and lockdowns. It’s not a very defensive business, but I think it’s still a buy thanks to the elevated demand.

The post Macquarie tips $800m buyback for Qantas shares appeared first on The Motley Fool Australia.

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• Qantas boss says ‘we’re back’, but should you buy the ASX airline share?
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• How is the Qantas share price avoiding today’s carnage?
• Why did the Qantas share price fly 16% higher in October?
• Qantas shares are up 13% this year, but could the CEO’s pay still be in jeopardy?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. 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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Thanks to sky high coal prices, owners of New Hope Corporation Limited (ASX: NHC) shares have been rewarded handsomely with big dividends this year.

Will this trend continue and should you buy the ASX 200 coal miner’s shares?

Should you buy New Hope shares for the dividends?

According to a note out of Morgans, its analysts believe New Hope shares offer a lot of value at current levels.

This morning the broker has retained its add rating with a trimmed price target of $7.00. Based on the current New Hope share price of $6.45, this implies potential upside of 8.5% for investors.

However, that isn’t even half of the story! In fact, it’s less than a third of the story when it comes to potential returns.

The note reveals that Morgans expects the New Hope dividend to come in at $1.20 per share in FY 2023. This represents a massive fully franked 18.6% dividend yield for investors, which stretches the total potential return to 27%.

What else did the broker say?

Morgans believes New Hope may not stop at a $1.20 per share dividend. It also sees potential for an on-market share buyback to boost capital returns even further thanks to its ballooning cash balance. It explained:

We forecast accumulation of ~$1.75bn of net cash by end FY23 pre dividends. If we exclude $250m as a balance sheet buffer, then plausibly +$1.5bn ($1.59ps) is available for distribution via the announced onmarket buyback (up to $300m) and dividends. We think our current $1.20ps FY23 dividend forecast is fair given on-market buying is now in play, though it’s possible the on-market will wait/rank behind potential notes re-purchases.

NHC currently offers a ~27% 12-month base case total return, but with clear upside leverage to higher-than-expected coal prices, driving upside risk to excess cashflows and fully franked dividends.

The post Morgans expects a fully franked 17% dividend yield from this ASX 200 share in 2023 appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Tuesday
• Could China be about to rain on the ASX 200 coal share parade?
• Here are the top 10 ASX 200 shares today
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• New Hope share price jumps on $300m buyback plans

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Tesla (NASDAQ: TSLA) is already dealing with COVID-19-related issues at its most productive facility in Shanghai, China. But other factors are weighing on the stock today, too. That has led to a decline in the shares this morning, with the stock reaching its lowest level in 18 months. As of 11:43 a.m. ET Monday, Tesla shares were down 5%.

So what

Tesla’s China plant recently was upgraded for the ability to produce an annual capacity of about 1.1 million vehicles. But last week, Barron’s reported that the facility shipped 71,704 electric vehicles in October, down from the record 83,135 delivered the previous month. China’s strict COVID-19 policies, which have resulted in lockdowns throughout the region, have negatively affected productivity.

That has also impacted consumer demand in China, and it might be partly why Tesla recently lowered prices for Chinese customers. But another factor could be weighing on Tesla shares today, too, and it doesn’t have to do with the business itself.

Now what

Now that Tesla CEO Elon Musk has taken Twitter private, the entrepreneur has one more major item on his plate. But that might not be the biggest concern for Tesla investors. Musk used some debt to buy Twitter, and interest payments will need to come from either the business’s cash flow or some other source. Several companies have announced a suspension in advertising on Twitter until the new direction of the social media site is more clear. That could mean lower cash flow, and Musk might need to service the debt interest payments from his own funds.  

The problem for Tesla shareholders is that Musk might have to sell more Tesla stock if he needs to raise short-term cash. That could be what is now impacting Tesla stock, or it could be other shareholders trying to game that potential.

For long-term investors, however, that shouldn’t be a concern. In fact, for those wanting to hold Tesla stock for years, this could be a good chance to start a position at a better price. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Tesla shares dropped below $200 on Monday appeared first on The Motley Fool Australia.

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• Forget Dogecoin, this crypto could be the even bigger winner from Elon Musk’s Twitter takeover
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• Why Tesla stock was up this morning

Howard Smith has positions in Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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If you’re an income investor, then read on! Listed below are two ASX dividend shares that have just been rated as buys by analysts.

Here’s what they are saying about these top ASX 200 dividend shares:

Australia and New Zealand Banking Group Ltd (ASX: ANZ)

The first ASX 200 dividend share that could be a buy is big four bank ANZ Bank.

The team at Citi appear to believe the banking giant would be a great option to an income portfolio. Its analysts currently have a buy rating and $29.25 price target on the company’s shares.

Citi was pleased with ANZ’s FY 2022 results and particularly its exit net interest margin (NIM). Combined with core earnings momentum, it believes the bank is well-positioned for the future. As a result, it has boosted its earnings and dividend estimates accordingly. The broker commented:

[T]he exit NIM of 1.80% is likely to drive material consensus revenue upgrades, and we think the street upgrades core earnings. We retain our Buy call, with core earnings momentum and benign asset quality.

In respect to dividends, Citi is forecasting fully franked dividends of $1.66 per share in FY 2023 and $1.76 per share in FY 2024. Based on the current ANZ share price of $24.33, this will mean yields of 6.8% and 7.2%, respectively.

Deterra Royalties Ltd (ASX: DRR)

Another ASX 200 dividend share to look at is Deterra Royalties.

It operates a royalty business model which involves the management and growth of a portfolio of royalty assets across a range of commodities. These are primarily focused on bulks, base and battery metals, and include the Mining Area C (MAC) iron ore operation, which is co-owned with BHP Group Ltd (ASX: BHP).

Goldman Sachs is very positive on Deterra. Last month its analysts upgraded the company’s shares to a buy rating with a $4.70 price target. It explained:

Upgrade royalty company DRR to Buy (from Neutral) on valuation (~0.85xNAV), 6.5-8% dividend yield, upside at BHP’s South Flank mine with the ramp-up ahead of schedule, and no exposure to escalating industry opex and capex.

As for dividends, it is expecting fully franked dividends per share of 31.5 cents in FY 2023 and 26.2 cents in FY 2024. Based on the current Deterra Royalties share price of $4.17, this will mean yields of 7.5% and 6.3%, respectively.

The post Analysts say these ASX dividend shares are buys this week appeared first on The Motley Fool Australia.

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• Brokers name 3 ASX shares to buy today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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Warren Buffett – broadly heralded as the world’s greatest investor – often admits he doesn’t watch the market closely. However, it’s safe to say he takes advantage of market crashes.

Major downturns are an inevitable part of investing in the stock market. They can be disappointing, if not devastating, for the unprepared, and their timing is nearly impossible to predict.

But they don’t concern Buffett. As the ‘Oracle of Omaha’ oh so confidently told investors in 1994:

Stock prices will continue to fluctuate – sometimes sharply ­– and the economy will have its ups and downs. 

Over time, however, we believe it highly probable that the sort of businesses we own will continue to increase in value at a satisfactory rate.

Indeed, the billionaire’s company, Berkshire Hathaway Inc (NYSE: BRK), has consistently delivered major returns. Its stock has gained more than 2,000% since 1994.

So, how does Buffett thrive through market crashes? Keep reading to find out.

Buffett wisdom on market crashes

Buffett not only believes a market crash is always coming, but he is also generally ready at the wheel to take advantage.

The investing great’s strategy of buying shares in quality companies for cheap prices and holding them over the long term is arguably best executed during a market crash.

Competitive, well-managed businesses often trade at prices well below their worth during downturns.

Berkshire Hathaway snapped up around US$9 billion of shares over the September quarter, selling just US$5 billion worth, The Motley Fool reports.

That’s despite the S&P 500 Index (SP: .INX) slumping another 5% over the period, leaving it down 25% year to date at the end of September – firmly in bear market territory.

Thus, I encourage investors to think of a market crash as a sale on quality shares.

Need an example? Just look at the 2020 COVID-19 crash, wherein the S&P/ASX 200 Index (ASX: XJO) tumbled 32% in a matter of weeks before reaching a new record high just months later.

Of course, that was a notably quick crash and an extremely fast recovery, but the point stands. Many of the market’s highest-quality businesses likely took a brief tumble over those months, leaving them ripe for the picking.

Thus, long-term investors will be hard-pressed not to experience a market crash, but I wouldn’t let the next one bother me.

The market has historically always returned to, and surpassed, its previous highs. Perhaps no one knows this better than Buffett.

The post Why I think Warren Buffett is right to always think a market crash is coming appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Tuesday
• Here are the top 10 ASX 200 shares today 
• Here are the 3 most heavily traded ASX 200 shares on Monday
• Why is the De Grey Mining share price leaping 7% today?
• Why is the Telstra share price trailing the ASX 200 on Monday?

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and recommends Berkshire Hathaway (B shares). The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has no position in any of the stocks mentioned. 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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The BHP Group Ltd (ASX: BHP) dividend is one of the most popular options on the Australian share market for income investors.

And it isn’t hard to see why! BHP traditionally shares a good portion of its free cash flow with investors, leading to above-average fully franked dividend yields.

But will this remain the case in the coming years? Let’s look to see what analysts at Goldman Sachs are predicting for the BHP dividend in the coming years.

Where is the BHP dividend heading?

Firstly, as a reminder, in FY 2022 the Big Australian rewarded shareholders with total fully franked dividends of US$3.25 (A$5.02) per share.

However, due to weakness in the iron ore price, the petroleum demerger, and a softer copper price, Goldman Sachs is expecting a sizeable reduction in the BHP dividend in FY 2023.

Its analysts are currently forecasting a US$1.60 (A$2.47) per share dividend for the 12 months. Based on the current BHP share price of $40.48, this implies a fully franked 6.1% dividend yield for investors.

The following year, in FY 2024, the broker is forecasting a fully franked US$1.33 (A$2.05) per share dividend. This will mean a yield of almost 5.1% for investors that year.

Another cut is expected in FY 2025. This is being driven by its expectation for further weakness in iron ore prices. Goldman Sachs is forecasting a US$1.14 (A$1.76) per share dividend for the period, which represents a 4.35% fully franked dividend yield.

Unfortunately, the unwelcome trend continues in FY 2026, with the broker expecting another cut to the BHP dividend. It is forecasting a US$1.02 (A$1.57) per share dividend, which implies a 3.9% yield. The good news, though, is that Goldman is calling a bottom to the BHP dividend this year and expects a long-awaited increase to follow in FY 2027.

The broker has pencilled in a fully franked US$1.06 (A$1.63) per share dividend for that year, which equates to a 4% yield.

All in all, this breaks down as follows:

• FY 2023 – 6.1% yield
• FY 2024 – 5.1% yield
• FY 2025 – 4.35% yield
• FY 2026 – 3.9% yield
• FY 2027 – 4% yield

Though, it is worth remembering that a lot can change in a short period in the resources sector. Just look at the coal price. Nobody wanted to touch the stuff a year ago and now it is commanding sky high prices and underpinning huge dividend payments for coal miners.

The post Here’s the BHP dividend forecast through to 2027 appeared first on The Motley Fool Australia.

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• Why Arafura Rare Earths, BHP, Capricorn Metals, and Newcrest shares are rising today
• Why are ASX 200 mining shares bolting out the gates on Monday?
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• BHP share price tumbles with ASX 200 despite renewables deal
• What’s the forecast for the iron ore price right now?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The Allkem Ltd (ASX: AKE) share price has been a bright spot in the S&P/ASX 200 Index (ASX: XJO) this year. 

While many ASX 200 shares have trudged lower, the Allkem share price has surged 34% since the beginning of the year as ASX lithium shares continue to steal the spotlight.

The attention will stay on Allkem next week as the company holds its 2022 annual general meeting (AGM) on Tuesday.

With proceedings kicking off at 10.30am, shareholders will be able to attend this AGM either virtually or in person at the Museum of Sydney.

In the meantime, let’s see what leading brokers think about the Allkem share price.

Is the Allkem share price a buy?

Analysts at Macquarie are fighting for the bulls. The broker currently has an outperform rating on Allkem shares, with a price target of $21.00. This implies potential upside of 40% over the next 12 months.

Macquarie notes that Allkem is planning to triple its production by 2026 to 120 kilotonnes per annum and there are a number of studies underway to increase volumes further. What’s more, in Macquarie’s eyes, buoyant lithium prices continue to drive material upside.

Bell Potter is another broker siding with the bulls. After digesting Allkem’s first-quarter results, Bell Potter retained its buy rating and slightly trimmed its price target to $19.45. This implies potential upside of 30% over the next 12 months.

On the back of ongoing strength in lithium demand, commodity prices, and production growth, the broker expects Allkem’s cash generation to lift substantially into 2023.

Summarising its positive view, Bell Potter noted:

​​AKE is aiming to maintain 10% share of supply in a global lithium market experiencing unprecedented growth; it has a portfolio of growth projects, balance sheet strength and cash flow from existing projects to achieve this. AKE’s portfolio is also diversified across lithium commodity, mode of production, asset location and end-user country.  

Has the Allkem share price peaked?

While Macquarie and Bell Potter are bullish on Allkem shares, Morgans remains sceptical. 

Its analysts weren’t impressed with Allkem’s latest quarterly update. As a result, Morgans retained its hold rating on Allkem shares and trimmed its price target to $15, in line with where shares sit today.

The broker acknowledges that Allkem is a well-diversified lithium producer across different products and geographies. It also believes Allkem will outperform its peers over the cycle. However, summarising its cautious view, Morgans concluded:

…it’s not clear to us whether or not there will be shorter term interruptions to the likely long term uptrend in lithium demand that means there could be a better entry point. Given the stock’s previous sensitivity to the outlook for lithium prices and, in our view, the potential for prices to move away from their recent new found highs, we maintain our HOLD rating.

Allkem share price snapshot

Investors last heard from Allkem when the ASX lithium share released its first-quarter results last month. So, instead of a trading update, next week’s AGM could focus on the company’s strategy and outlook.

It’s been a bumper year for the Allkem share price, with shares rocketing by 58% over the last 12 months. 

Allkem is one of the largest lithium miners in the world. And it’s the second-largest lithium share on the ASX, commanding a market capitalisation of $9.5 billion.

Holding the top spot is Pilbara Minerals Ltd (ASX: PLS), which currently boasts a market cap of $15.5 billion.

The post Is the Allkem share price a buy ahead of next week’s AGM? appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Why Allkem, Block, Bowen Coking Coal, and CSR shares are racing higher
• Which is the better ASX buy, Allkem or Core Lithium shares?
• Why are ASX lithium shares smashing the market today?
• 2 excellent ASX growth shares that analysts say are buys

Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. 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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The Medibank Private Ltd (ASX: MPL) share price is on watch this morning.

This comes as news hits the wires that the S&P/ASX 200 Index (ASX: XJO) health insurer has been hit with a class action over the 12 October data breach.

Yesterday the Medibank share price finished up 0.4% after the company updated the market on its response to the data theft.

The company said the hacker had accessed the name, date of birth, address, phone number and email address of 9.7 million current and former customers along with some of their authorised representatives.

That group includes  5.1 million Medibank customers, 2.8 million AHM customers and 1.8 million international customers.

Medibank said it would not pay any ransom demands.

According to CEO David Koczkar:

Based on the extensive advice we have received from cybercrime experts we believe there is only a limited chance paying a ransom would ensure the return of our customers’ data and prevent it from being published.

Today the company faces its first, but perhaps not last, class action over the incident.

This comes alongside news that the hackers have threatened to publish the customer data within 24 hours.

What’s happening with the Medibank class action?

The Medibank share price is on watch after Bannister Law Class Actions and Centennial Lawyers reported they will jointly investigate the cyber breach.

In a statement released this morning, Bannister said (courtesy of The Sydney Morning Herald):

We believe the data breach is a betrayal of Medibank Private’s customers and a breach of the Privacy Act. Medibank has a duty to keep this kind of information confidential.

The two firms will be investigating Medibank breached their privacy policy and the terms of their contract of the medical insurance which they provided to their customers. The lawyers will also assess whether damages should be paid to Medibank customers as a result of their breaches.

Medibank share price snapshot

The Medibank share price has come under significant pressure since the hacking attack was revealed. Shares are currently down 17.5% in 2022. That compares to an 8.6% year-to-date loss posted by the ASX 200.

The post Medibank share price on watch amid class action and new data threat appeared first on The Motley Fool Australia.

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More reading

• Medibank share price lifts on cyberattack ransom update
• Here are the top 10 ASX 200 shares today
• ‘Close to bottom’: Expert names 3 bargain ASX shares to buy right now
• Here are the 3 most traded ASX 200 shares on Wednesday
• Could the Medibank share price be on the road to recovery?

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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I like all of the ASX shares in my portfolio for different reasons. I think some offer good growth potential, others are defensive, and many of my positions are attractive for dividends.

But my all-time favourite is Soul Pattinson and Co. Ltd (ASX: SOL).

For readers that haven’t heard of the company before – it’s not exactly a household name – Soul Pattinson is an investment house that has been listed since 1903. It started as a pharmacy business but has since diversified into a major company with a market capitalisation of $10 billion.

Soul Patts is my favourite for many reasons. But I’ll pick out the top three that explain why I like it the best.

1. Suited for tough times — and good times too

Soul Pattinson has designed its portfolio to gain exposure to various asset classes across sectors, including private equity, private credit and property.

It’s invested in many ASX shares like TPG Telecom Ltd (ASX: TPG), Tuas Ltd (ASX: TUA), New Hope Corporation Limited (ASX: NHC), Brickworks Limited (ASX: BKW), Pengana Capital Group Ltd (ASX: PCG), Aeris Resources Ltd (ASX: AIS), Wesfarmers Ltd (ASX: WES), BHP Group Ltd (ASX: BHP) and Macquarie Group Ltd (ASX: MQG), to name a few.

Private holdings include agriculture, electrical parts business Ampcontrol and a swimming school business called Aquatic achievers.

Soul Pattinson says that it’s increasing diversification of uncorrelated assets and has “resilience” from profitable low-cost operations with “robust, defensible” business models.

I think we can see the pleasing long-term performance of the company from its total shareholder returns. At 31 July 2022 – the end of its FY22 – the investment house had produced average total shareholder returns of 10.5% per annum over the prior five years (assuming reinvestment of dividends).

That compares to the 8.4% average return per annum over the same time period for the All Ordinaries Accumulation Index (ASX: XAOA). Soul Pattinson’s shareholder returns produced an outperformance of an average of 2.1% per annum.

2. Always updating the portfolio

Another reason why Soul Pattinson shares are at the top of my list is that the company can always change its portfolio of investments.

It isn’t stuck being a bank, supermarket, miner or any other industry. Not that there’s anything wrong with those sectors. Soul Pattinson’s investment portfolio is diversified, but management can sell an investment if they think it would get a great price or if it no longer has a compelling future.

The ASX share is always on the hunt for new investments that can help it grow.

This regular renewal of the portfolio means that it should be future-focused and able to future-proof itself.

I don’t think I’ll ever need to sell my Soul Pattinson shares. This means that I benefit from compounding and don’t need to activate any capital gains tax (events).

3. Growing dividend

The third positive I’ll point out is the company’s consistently-growing dividend.

One of Soul Pattinson’s main aims is to grow its dividend, and it has done this for shareholders every year since 2000. I think that’s a great record – the longest on the ASX.

Dividends are certainly not guaranteed.

But, the ASX share receives cash flow from its investments in the form of dividends. It then pays out most of the net cash flow as a dividend after paying for its expenses.

But, it retains some of that net cash flow to re-invest in more opportunities. These can help grow its portfolio value and net cash flow and help fund future dividends from Soul Pattinson shares.

The post Out of all the ASX shares I own, this is my favourite. Here’s why appeared first on The Motley Fool Australia.

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More reading

• Here’s how I allocate my ASX share portfolio and why
• Set for life: 5 ASX dividend shares I’d invest in if I ever had a million-dollar windfall
• Guess which ASX 200 directors bought $4m worth of their company shares last week
• When it comes to ASX 200 dividend shares, is there any such thing as truly passive income?
• 2 ASX defence shares soaring on big news today

Motley Fool contributor Tristan Harrison has positions in Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks, Washington H. Soul Pattinson and Company Limited, and Wesfarmers Limited. The Motley Fool Australia has recommended Macquarie Group Limited and TPG Telecom Limited. 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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