Here’s why I think every ASX dividend investor should own shares of Washington H. Soul Pattinson and Co Ltd (ASX: SOL).

‘Soul Patts’ (as it’s more easily known) is an ASX conglomerate that’s sometimes described as the ‘Berkshire Hathaway’ of the ASX. That’s because Soul Patts’ management follows a remarkably similar strategy to that of Berkshire’s famous chief Warren Buffett.

Buffett has made a name for himself by acquiring a diverse range of top-quality businesses that all sit within the Berkshire stable. The combination of these businesses results in a company that Buffett himself likes to describe as a ‘financial fortress’.

And that’s exactly what Soul Patts tries to emulate.

Some of the companies it owns shares of include phone-and-internet provider TPG Telecom Ltd (ASX: TPM), coal miner New Cope Corporation Limited (ASX: NHC), building supplies manufacturer (and part-time landlord) Brickworks Limited (ASX: BKW) and investment company BKI Investment Co Ltd (ASX: BKI). With this healthy cross-section of the ASX, I think Soul Patts is one of the best ways to get broad exposure to the Australian economy outside of buying an index fund.

But it’s the Buffett-esque long-term thinking and eye on the bigger picture that makes Soul Patts stand out, in my view. All of the businesses above pour dividends into Soul Patts every year and all have shown their worth over many years for the company.

An ASX dividend king?

Speaking of dividends, we now come to the crux of this company’s potential. Soul Patts has one of – if not the – best dividend records of any company on the ASX. It has paid a dividend every year since its listing in 1903 – think about that! Its shareholders have enjoyed payouts every year of the Great Depression and every year of the Second World War.

Not only that, but Soul Patts is also the only company on the ASX to have delivered a dividend increase every year since 2000. Anyone who bought shares in the year 2000 (for $3.50) is now getting an approximate yield-on-cost of 16.86% per annum!

One other ASX company – Ramsay Health Care Limited (ASX: RHC) – also held this record but lost it this year when it suspended its dividends, along with many other former ASX dividend heavyweights.

This elevates Soul Patts even higher in my eyes. It remains hands-down the best dividend share on the ASX for these reasons and leaves no argument (in my view) that this ASX share should be in every dividend investor’s portfolio.

More reading

• 2 quality ASX shares to buy for long-term growth
• Is it time to invest in shares or wait on the sidelines?
• Top ASX Dividend Stock Picks for May 2020
• Want to become wealthy? Do this one thing
• 3 of the best ASX dividend shares for income

Motley Fool contributor Sebastian Bowen owns shares of Ramsay Health Care Limited and 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. The Motley Fool Australia has recommended Ramsay Health Care 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 every dividend investor should own this ASX share appeared first on Motley Fool Australia.

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By now, almost all Aussies would be familiar with our record-low interest rates in one way or another. Whether it’s a mortgage costing a homeowner just 2.5% per annum or a term deposit paying 1%, low interest rates have certainly worked their way into everyday life.

But according to reporting in the Australian Financial Review (AFR), we might not be at the end of the road just yet.

But how is that possible given interest rates are at just 0.25% – one cut above zero?

Well, according to the AFR, the Reserve Bank of New Zealand (RBNZ) is in discussions with our ‘big four’ banks, including Commonwealth Bank of Australia (ASX: CBA), in “getting their systems ready” for the possible introduction of negative interest rates, which the RBNZ said, “will become an option” in early 2021.

The AFR quotes the RBNZ as stating: “The committee noted that a negative official cash rate will become an option in the future, although at present financial institutions are not yet operationally ready”.

What are negative interest rates?

If negative interest rates did become a reality across the ditch, our own Reserve Bank of Australia might be forced to follow suit.

Negative interest rates result in a strange situation where borrowers are actually paid to borrow and savers are penalised for saving. We have already seen this paradigm play out in recent years across a few countries, especially in Europe and Japan.

Aside from some odd consequences that we may see (such as cash hoarding), negative rates would probably be a tailwind for ASX shares. That’s because negative rates narrow the range of assets which investors can use to generate real returns to essentially just shares and property. As discussed earlier, bank accounts and term deposits are out, as would be government bonds. What would you rather, some shares of Woolworths Group Ltd (ASX: WOW) yielding 2.95% per annum or a term deposit that costs you 1%?

The answer’s obvious. Thus, if we did see negative rates in Australia or even New Zealand, I would expect demand for ASX shares to rise, with the possible exception of ASX banks.

Negative rates would be terrible for our banks – who will have to try and turn a profit by convincing customers to keep their cash with them for no reward or even under financial penalty, rather than under the mattress.

When a bank has to compete with the bedding for your cash, it’s not a good sign!

More reading

• ASX 200 up 0.35%, CBA gives Q3 update
• With Aussie wages set to fall, could ASX 200 shares follow?
• This is the best ASX big bank stock you can buy right now
• 4 top ASX shares to invest $4,000 into immediately
• How can the ASX 200 soar with rising unemployment?

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Woolworths 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 Negative interest rates coming? Here’s what it would mean for ASX shares appeared first on Motley Fool Australia.

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