This may be a year where owning defensive ASX dividend shares makes sense.
The new political leadership in the US could stir things up, depending on what’s decided and the flow-on effects
There are some businesses with extremely high valuations, which I’m choosing to avoid, including some of the largest ASX dividend shares.
That’s why there’s one business in particular that makes a lot of sense to me.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
It’s a very diversified investment company which has assets across various sectors.
The business is invested in industries like resources, telecommunications, agriculture, swimming schools, financial companies, healthcare, retail and more.
The company has a wide range of investments in a number of ASX shares including Brickworks Ltd (ASX: BKW), New Hope Corporation Ltd (ASX: CHC), TPG Telecom Ltd (ASX: TPG), Tuas Ltd (ASX: TUA), BHP Group Ltd (ASX: BHP), Macquarie Group Ltd (ASX: MQG), Wesfarmers Ltd (ASX: WES), Westpac Banking Corp (ASX: WBC), CSL Ltd (ASX: CSL), Nexgen Energy (Canada) CDI (ASX: NXG), Pengana Capital Group Ltd (ASX: PCG) and Aeris Resources Ltd (ASX: AIS).
By having such a diverse portfolio, it means the business can generate profits and cashflow that are somewhat unrelated to the overall ASX share market. The ASX dividend share has a track record of falling less than the overall Australian stock market when there is a decline.
In my opinion, it’s this setup that has allowed the business to pay a steadily-growing dividend ever since 2000. That’s the sort of track record that’s very reassuring.
If someone had held WHSP shares since 2000, their dividend income wouldn’t have noticed the pain of the GFC, COVID-19 or the recent inflation troubles. The dividend yield is close to 4%, when we include the bonus of franking credits.
I like how WHSP occasionally makes a new investment to expand its portfolio and boost its growth prospects further. Names like Nexgen and Tuas could be the next pillars of its portfolio, particularly if/when they start paying dividends.
With how diversified the portfolio is, combined with the flexible investment mandate, I’d argue it’s more diverse and higher-performing than Vanguard Australian Shares Index ETF (ASX: VAS).
