When we think about the resources sector two names immediately spring to mind: Rio Tinto (ASX: RIO) and BHP Billiton (ASX: BHP). And it's easy to see why.
Both have huge market capitalisations and, at least it seems, each have their finger in every nook and cranny worthy of exploration and development.
However both companies have, over the long-term, proven to be just as volatile as their smaller counterparts and, in some cases, detrimental to shareholders' wealth. Especially when they're compared to well-managed mid-cap resources companies such as Beach Energy (ASX: BPT).
So how else can investors can get exposure to Australia's fast paced and highly lucrative resources sector without risking too much? The answer: with the following 2 companies.
1. Aurizon Holdings Limited (ASX: AZJ)
Aurizon, formally QR National, is Australia's premier rail freight operator. With wide moats afforded to it, Aurizon presents itself a relatively safe way to play the ongoing demand for Australia's natural resources. Although it trades on a P/E of 20, in the long-term, earnings and dividends will likely grow strong and consistently. In its most recent half-yearly report, Aurizon continued to set record volumes of iron ore and coal and upped it guidance for the full-year.
2. APA Group (ASX: APA)
Following its takeover offer of pipeline owner Envestra (ASX: ENV), APA Group shares have been thrust into the spotlight. APA – which includes the Australia Pipeline Trust and APT Investment Trust – has an extensive network of natural gas pipelines, storage facilities and wind farms. Like Aurizon, the natural moat its building will produce stable and consistent earnings growth for many years into the future. At current prices it's forecast to pay a 5% dividend.
If you're looking for resources companies with good dividends and consistent earnings growth then Aurizon and APA Group could be what you're after. However their share prices demand a premium to what many of us are likely willing to pay.
