There are some businesses in the S&P/ASX 200 Index (ASX: XJO) that have relatively high dividend yields and a history of increasing those payments for shareholders.
With the Reserve Bank of Australia (RBA) official interest rate at almost 0%, it’s hard to generate any meaningful returns from cash in the bank.
Here are two businesses with a track record of growing dividends:
APA Group (ASX: APA)
APA is one of the largest infrastructure shares on the ASX. It owns a vast gas pipeline network around Australia, it reportedly supplies around half of the country’s natural gas.
The ASX 200 share also has a number of renewable energy investments, as well as gas assets such as storage.
APA has a long record of distribution increases for shareholders – it has grown its distribution every year for around a decade and a half.
The business funds its distributions from the operating cashflow that its assets generate each year.
APA recently announced a 4.3% increase of its interim distribution to 24 cents per security. That came off the back of a 1.4% increase in operating cashflow in the FY21 half-year result. Management said that there was strong volume growth in Western Australia, the Northern Territory and sections of the east coast grid offset by softer contract renewals and lower energy consumption in Victoria.
However, the other statistics in the result showed a decrease for the ASX 200 share – revenue fell 0.6%, earnings before interest, tax, depreciation and amortisation (EBITDA) dropped 2.3% and net profit excluding significant items declined 7%.
The reported net loss after tax was $11.7 million from the ASX 200 share, which included a non-cash impairment recognised against the Orbost Gas Processing Plant of $174.5 million.
APA is expecting to pay a distribution of 51 cents per security for FY21, which would be a 2% increase.
At the current APA share price, that would represent a distribution yield of 5.5%.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Patts one of the oldest businesses on the ASX. It was started as a pharmacy business over a century ago as a partnership between two existing pharmacy businesses.
Soul Patts still has an exposure to pharmacies and the Soul Pattinson chemist chain with its holding of Australian Pharmaceutical Industries Ltd (ASX: API) shares.
It’s now a diversified company with many investments across different sectors.
Some of the ASX 200 share’s investments include Brickworks Limited (ASX: BKW), New Hope Corporation Limited (ASX: NHC), TPG Telecom Ltd (ASX: TPG), Milton Corporation Limited (ASX: MLT) and Bki Investment Co Ltd (ASX: BKI). It also has plenty of unlisted investments and businesses like financials services, swimming schools and resources.
One of the advantages of the Soul Patts model is that it can invest in any asset that it thinks is a good opportunity. In recent times it has invested in various assets like agriculture, Retail Food Group Ltd (ASX: RFG) shares and luxury retirement living. It also tried to buy Regis Healthcare Ltd (ASX: REG).
Soul Patts has grown its dividend every year since 2000, which is the best record on the ASX.
At the current Soul Patts share it has a grossed-up dividend yield of 2.8%.
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Returns As of 15th February 2021
More reading
- 2 top ASX dividend shares to buy
- 3 reasons why Brickworks is a great ASX dividend share
- No ASX dividend share is perfect, but Soul Patts (ASX:SOL) is more perfect than most
- APA (ASX:APA) share price on watch with HY21 report, upgrades distribution guidance
- 3 ASX shares that keep growing the dividend every year
Motley Fool contributor Tristan Harrison owns shares of 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 owns shares of APA Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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