When you're looking to generate passive income from the share market, you want reliability.
No income investor wants to see their payouts change wildly each year. They want their income to ideally increase nicely each year, giving them a predictable and growing source of passive income.
The good news is that there are a number of Australian dividend shares out there that have the potential to provide passive income investors with exactly that. Here are two:
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IPH Ltd (ASX: IPH)
IPH is an international intellectual property (IP) services company with a network of member firms working throughout ten IP jurisdictions, with clients in more than 25 countries.
The company notes that it works with a diverse client base of Fortune Global 500 companies and other multinationals, public sector research organisations, SMEs, and professional services firms.
Demand for intellectual property (IP) services remains robust whatever is happening in the world. This means that IPH benefits from very defensive earnings. A demonstration of this is that the company was one of only a handful to continue paying (and growing) their dividends during the COVID pandemic.
In fact, the company has lifted its dividend each year for the past decade. And Goldman Sachs believes this trend can continue for at least the next three years. But despite this, the Australian dividend share gets little love from the market and its shares are trading within sight of a 52-week low.
It is for this reason that the broker is urging income investors to snap up its shares with its buy rating and $7.50 price target.
As for passive income, the broker expects further increases to a fully franked 36 cents per share in FY 2025 and then 39 cents per share in FY 2026. Based on the current IPH share price of $5.39, this represents dividend yields of 6.7% and 7.3%, respectively.
APA Group (ASX: APA)
Another reliable Australian dividend share with an impressive run of dividend increases is APA Group.
It is a leading Australian energy infrastructure business that owns and/or operates a $26 billion portfolio of gas, electricity, solar and wind assets.
It is about as reliable as they come on the Australian share market for passive income. APA Group is on track to lift its dividend for 20 years in a row.
Macquarie then expects the run to continue. It is forecasting dividend increases to 57 cents per share in FY 2025 and then 57.5 cents per share in FY 2026. Based on the current APA Group share price of $6.70, this equates to 8.5% and 8.6% dividend yields, respectively.
Macquarie has an outperform rating and $8.23 price target on its shares.
