Here's my number 1 passive income stock for 2026
The ASX passive income stock Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is my leading pick for dividends in 2026.
Regular readers will know I'm a big fan of this business, but I think this is a particularly good time to look at investing in it for passive income.
For starters, the Soul Patts share price has dropped by 16% since September 2025. I get excited when my favourites trade at a discounted price.
The investment conglomerate is already the largest position in my portfolio, and I'm planning to buy more for a few different reasons.
Solid starting dividend yield
If I'm investing in an ASX passive income stock, I'm choosing it with a good initial dividend yield.
I would much rather own Soul Patts shares than have cash in the bank because of the size of the payout and the ability to grow that payment over time.
Based on the FY25 payout, Soul Patts has a grossed-up dividend yield 4%, including franking credits.
Impressively, the business has hiked its annual ordinary dividend every year since 1998, the longest record on the ASX.
I estimate that Soul Patts will pay an annual dividend per share of $1.08, which translates into a potential grossed-up dividend yield of 4%, including franking credits.
I'm very pleased to own an ASX passive income stock that has a clear desire to regularly increase the payout for investors.
Expanding investment portfolio
I like that Soul Patts is an ever-evolving business because of its flexible investment mandate, allowing it to buy and sell assets as it sees new opportunities. This helps it remain future-proof.
Additionally, Soul Patts pays out a majority of the cash flow it receives each year, but it can invest the remainder into new opportunities.
With how Soul Patts is set up, I think it's a good option for steady compounding as it builds up its portfolio value through new and existing investments.
In recent times, it has allocated money towards areas like electrification, agriculture, swimming schools and more. It has also invested internationally, which I think is a positive development because of the numerous opportunities overseas.
Defensive positioning
Soul Patts has deliberately built its portfolio to be defensive and largely uncorrelated.
Its portfolio being spread across numerous sectors means the company receives cash flow from a variety of sources. This defensive cash flow is integral for paying the consistent and growing passive income.
I like the industries it's invested in, including telecommunications, resources, building products, industrial properties, financial services, healthcare and more.
I don't know what's going to happen in 2026 and beyond, but I think the company's portfolio has good prospects of delivering good returns in the long-term and it should be able to generate good earnings, even if there's a downturn, thanks to its defensive portfolio.
The post Here's my number 1 passive income stock for 2026 appeared first on The Motley Fool Australia.
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. The Motley Fool Australia has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2026