Rio Tinto vs APA Group: Which is better for passive income?

Rio Tinto vs APA Group shares: Which is better for passive income?

Everyday Aussie investors often weigh Rio Tinto Ltd (ASX: RIO) against APA Group (ASX: APA) when hunting for steady, passive income from shares. The two are giants in totally different fields — with Rio Tinto at the heart of mining, and APA Group a backbone for Australia’s energy infrastructure. Both throw off regular dividends, but which one is more compelling for those wanting a reliable stream of cash flow? Here’s how they stack up for income-focused portfolios.

The case for Rio Tinto

Rio Tinto is one of the world’s largest miners, producing iron ore, aluminium, lithium, copper, and more. This global giant has been a mainstay of the ASX for decades. Its revenue streams are deeply tied to commodity cycles, but the company’s vast, low-cost assets and operational scale give it firepower for substantial and regular dividend payouts.

Looking at the latest numbers, Rio Tinto boasts a market cap of $61.76 billion and a price-to-earnings (P/E) ratio of 16.07. Its dividend yield stands at 3.99%, fully franked at 100%, meaning investors get the full benefit of franking credits. According to its most recent company profile, Rio Tinto has grown through many mergers and acquisitions, which has helped it become such a dominant force. Its scale, reliable cash flows, and tendency for occasional special dividends make it a go-to for income-seekers, especially those who value franking.

The case for APA Group

APA Group is Australia’s top energy infrastructure company, running a sprawling network of gas, electricity, solar, and wind assets. It owns and operates much of the country’s gas pipeline network and is steadily expanding into renewables. APA Group’s revenues are less sensitive to the wild ups and downs of commodities, thanks to long-term contracts and regulated assets. This can make its dividends feel steadier to income investors.

APA Group’s market cap is $14.27 billion, with a notably higher dividend yield at 5.39%. However, its P/E ratio is a lofty 68.36, which stands out compared to Rio Tinto’s much lower multiple. The franking level on APA’s dividends is well below Rio’s: the latest is just 31.4%, and looking back, many past dividends have variable (often low) franking. As of its company overview, APA Group actively invests in renewable assets amid its historical strength in gas. Investors who favour essential services or lower volatility in earnings may prefer APA’s business exposure and defensive qualities.

Recent share price performance

Here’s how their shares performed between 18 August 2026 and 17 September 2026.

• Rio Tinto: YTD return of 17.8%. During this month, the share price was somewhat volatile, starting around $167, peaking above $179 in early September before easing back to $166.09.
• APA Group: YTD return of 23.4%. APA shares began the period near $9.85 and rose steadily, ending at $10.78, representing a much smoother upward trend compared to Rio’s swings.

Which is the better buy?

For pure, reliable passive income, I’d lean toward Rio Tinto over APA Group. While APA Group boasts a punchier 5.39% yield and a record for steady dividends, its lower franking credit levels and extremely high P/E ratio (68.36) give me pause. By contrast, Rio Tinto’s 3.99% yield may not look as high at first glance, but it is fully franked, so the return after tax is more compelling — especially for those who benefit from franking credits.

Rio’s dividend history also shows substantial, ongoing payouts (plus occasional special dividends) backed by strong earnings and underlying cash flow. APA’s payout, while reliable, comes with much less franking and looks more stretched against its underlying earnings.

APA Group may appeal to investors more focused on lower earnings volatility and the appeal of essential infrastructure. But when I focus on the net after-tax income into my bank account — and factor in value metrics and payout sustainability — Rio Tinto is my pick for better passive income.

The post Rio Tinto vs APA Group: Which is better for passive income? appeared first on The Motley Fool Australia.

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Motley Fool contributor Laura Stewart 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. This article was prepared with the assistance of Large Language Model (LLM) tools for the initial draft. Any content assisted by AI is subject to our robust human-in-the-loop quality control framework, involving thorough review, substantial editing, and fact-checking by our experienced writers and editors holding appropriate credentials. The Motley Fool Australia stands behind the work of our editorial team and takes ultimate responsibility for the content published by The Motley Fool Australia.