This overlooked ASX stock has raised its dividend 20 years in a row

In a market that celebrates the next big lithium discovery or AI-adjacent tech play, there is something quite refreshing about a company that simply raises its dividend every single year.

Yes, every single year, for the last 20 years!

That company is APA Group (ASX: APA), and if it isn’t already sitting in your income portfolio, it’s one I’d consider.

Twenty years and counting

APA Group owns and operates the vast network of pipelines that transport natural gas from where it’s produced to where Australians actually use it, accounting for around half of the country’s domestic gas supply. 

Throughout many global economic crises over the past years, from the GFC to COVID and through every bit of market turbulence in between, APA has increased its dividend distributions.

The forward distribution yield currently sits at around 5.75%, and for Australian investors, the franking credits push that grossed-up return considerably higher.

This consistency is extraordinarily rare, but also demonstrates how defensive APA’s cash flows are.

Natural gas is something that is required by Australian industry and consumers year-round, regardless of prevailing economic conditions. 

The bull case for APA

APA has benefited over the last few months from the increase in global natural gas prices. 

But beyond this, APA also benefits from a unique regulatory structure. 

The Australian Energy Regulator sets the revenue APA can earn from its pipelines, guaranteeing a fair return on capital regardless of economic conditions. 

Investors can therefore consider APA a government-sanctioned monopoly. 

For defensively minded investors, this structure is quite reassuring.

The numbers stack up

The most recent half-year results were quite impressive. 

EBITDA grew 7.6% to $1.09 billion, and margins expanded to 77.3%.

This is the sort of growth and margin expansion APA needs to continue increasing its dividend. 

An additional advantage is that this provides APA with significant Free Cash Flow, which it can either reinvest in future revenue-generating capital expenditures or distribute to shareholders.

On top of this, APA holds around 70% of Australia’s gas transportation market share, serving 1.5 million connections.

This dominant market position protects APA from threats from new market entrants or other disruptive events.

The foolish takeaway

APA is more than just a yield play; its underlying business is performing strongly, and APA benefits from some unique competitive advantages. 

APA is also investing in its future, with a $3 billion renewable energy hub in Newman and hydrogen pipeline testing already underway. 

Twenty years of unbroken dividend growth, regulated cash flows, and a network nobody can replicate: sometimes even a boring business can make a great investment!

The post This overlooked ASX stock has raised its dividend 20 years in a row appeared first on The Motley Fool Australia.

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Motley Fool contributor Mark Verhoeven has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Apa Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.