Why I'm planning to buy more Soul Patts shares in 2027

Washington H. Soul Pattinson and Co Ltd (ASX: SOL) shares are already a sizeable part of my portfolio. I'm planning to buy plenty more Soul Patts shares in 2027 and beyond.

I've long seen the investment house as an attractive share to own with its defensive cash flow and rising dividend (which has risen every year since 1998). Those positives remain, but the company continues to add more pleasing attributes that increase the appeal.

The business has been listed on the ASX since 1903, making it one of the oldest companies we can buy in Australia. Being old doesn't necessarily make it a great investment, but I think it's pleasing to see that the business does have a track record of longevity through world wars, economic recessions, pandemics, and so on.

Let's run through why I'm planning to increase my stake next year.

Credit

Soul Patts is invested in a number of asset classes and sectors, such as energy, swimming schools, telecommunications, finance services, and property.

The business has significantly increased its exposure to credit this decade. But, unlike some players in the private credit sector that have suffered, Soul Patts has an impressive track record and it's able to generate stronger returns these days thanks to higher interest rates.

Soul Patts recently gave an investor briefing that outlined the positives of its credit strategy and a couple of things stood out.

As with many of its investments, Soul Patts is careful to consider the downside and risks. Lenders are paid first when a business runs into trouble. The owners' equity absorbs losses before Soul Patts' capital is touched.

It noted that 23 loans and bonds have been repaid in full with no capital losses. Impressively, Soul Patts noted that its internal rate of return (IRR) was 14.3%. Considering the downside protection, that's a great return, in my view.

The company has increased its capital deployed over the last couple of years, with the vast majority (74%) of that being senior secured lending and another 19% being junior secured lending.

Eyes on international markets

Most of Soul Patts' investments have focused on Australian assets and sectors in its history. But, the investment house is now considering a number of international prospects.

Soul Patts is looking at global credit partnerships with 15 partners (that are not widely known) targeting specific segments of the market, such as buying good loans at discounted prices, asset-backed lending, and other areas of the credit market.

However, it's not just credit where it could deploy money. It sees other opportunities with global partnerships, across private companies, 'real assets', and emerging companies.

With the private companies, Soul Patts is targeting an internal rate of return (IRR) of 20% per year.

It said it will only work with established managers with an excellent track record, who think and act like Soul Patts.

The company noted that it can attach franking credits from its $1 billion franking balance to distributions and gross up the return to Australian shareholders.

Its total commitments come to $2.65 billion for FY27. I expect its total invested internationally could rise significantly in the coming years and help drive returns.

Fixed income

Soul Patts has a new asset class in its portfolio with the FY26 result.

Central bank interest rates have risen so much that Soul Patts can now generate strong returns from cash and short-term instruments (bonds). At the end of FY26, fixed income made up 20% of the portfolio.

With an average credit rating of AA, its bond investments are high-quality and can generate solid cash returns for Soul Patts.

The business can deploy some of this money into other asset class opportunities when ideas present themselves.

Overall, I think the appeal of the business is increasing as the years go by, and I'm planning to invest more in Soul Patts shares next year and beyond.

The post Why I'm planning to buy more Soul Patts shares in 2027 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