ASX dividend shares are a varied lot. Some have dividend payouts that bounce around significantly, while others have built a history of increasing the dividend return every year.
Dividends are not guaranteed returns like interest from a term deposit. But some businesses operate in defensive industries which allow them to generate fairly consistent profit. Regular investing in their operations can unlock profit growth and dividend growth.
Not only can profit growth fund steadily rising payouts, but it can also lead to rising share prices over time as investors usually value a business by how much profit (and cash flow) it generates.
The below ASX dividend shares could be part of a diversified, income-focused portfolio.
Image source: Getty Images
Bapcor Ltd (ASX: BAP)
Bapcor describes itself as Asia Pacific's leading provider of vehicle parts, accessories, equipment, service and solutions.
It owns a number of vehicle-related businesses including Burson Auto Parts, Precision Automotive Equipment, BNT, Truckline, WANO, Autobarn, Autopro, Midas, ABS, Shock Shop and Battery Town.
Bapcor is aiming to be the market leader in supplying zero-emission vehicle parts and technologies. However, Bapcor points out that electric vehicles are only expected to be 7% of cars on the road in 2030.
The company points out that 80% of its revenue is from trade and wholesale, while 90% of revenue is "non-discretionary in nature." When a car part breaks, it needs to be replaced, and cars don't decide not to break just because interest rates are higher.
Bapcor says that its large network and "efficient service model create high barriers to entry."
In the first half of FY23, it achieved net profit after tax (NPAT) growth of 2.3% to $62 million, while the half-year dividend was up 5% to 10.5 cents per share.
Bapcor has grown its annual dividend each year since it first started paying one in 2015.
In FY24, the ASX dividend share is predicted to pay an annual dividend per share of 23 cents according to Commsec, which would be a grossed-up dividend yield of 5.25%.
The profit and dividend can keep rising as it grows its network in ANZ, benefits from a growing number of cars on the road, and expands its Thailand network beyond the current six Burson locations.
APA Group (ASX: APA)
APA is a large energy infrastructure owner, operator and developer. It owns a vast gas pipeline network around the country, as well as other gas assets like storage, processing and energy generation. The ASX dividend share also has a growing portfolio of renewable energy generation and electricity transmission.
The ASX dividend share has grown its distribution to shareholders every year since 2004, which is one of the longest dividend growth streaks on the ASX.
It pays the distribution from the cash flow it generates, which is rising over the years thanks to two factors. First, a large majority of its revenue is indexed to inflation, so it's getting a revenue boost during this era.
Second, the business is steadily adding to its asset base, such as completing additional gas pipelines.
In FY23 it grew its annual distribution by 3.8% to 55 cents per security. Commsec numbers suggest a distribution of 58 cents per security, which would be a distribution yield of 6%.
