Some ASX dividend shares have the potential to pay steady passive income to investors.
There are a group of businesses that may be well known for their dividends, however those dividends can be quite volatile over the years. Just look at how the BHP Group Ltd (ASX: BHP) dividends have changed over the last decade on the dividend chart.
But there are a number of businesses that are quite consistent with their dividend payments, and look to grow them when possible.
Here are two to consider:
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Wesfarmers Ltd (ASX: WES)
The company says that its primary objective is to provide a satisfactory return to shareholders. Its dividend is an important part of that. In FY21 it paid a dividend of $1.78 per share, which was an increase of 17.1% on FY20. That came after a 16.2% increase in the continuing underlying net profit to $2.4 billion.
Wesfarmers funds its dividend from several different businesses including Bunnings, Kmart, Officeworks, Target, Catch and other industrial divisions.
But Wesfarmers is constantly looking to support long-term growth through a number of initiatives. It's developing a market-leading data and digital ecosystem. Management are aiming to deliver a "seamless and personalised digital experience for customers across the retail businesses".
It's also looking to invest in platforms for long-term growth. Wesfarmers is going to build on recent investments, continue to direct capital to areas with strong growth prospects and focus on opportunities to build scale over time.
The company is currently in a fight to try to acquire Australian Pharmaceutical Industries Ltd (ASX: API).
Wesfarmers also says that it's going to accelerate the pace of its continuous improvement. The ASX dividend share is going to invest in technology and supply chain initiatives to improve the customer proposition. Other areas of focus include integrating sustainability further into divisional strategies, adjusting to changes in customer preferences and reinforcing its price leadership.
By FY23, Commsec numbers suggest Wesfarmers could pay an annual dividend of $1.87 per share. That translates to a grossed-up dividend yield of 4.8% at the current Wesfarmers share price.
APA Group (ASX: APA)
APA is one of the ASX dividend shares that has one of the longest dividend records, having grown its dividend every year for the last decade and a half.
The business has seen its share price fall by around 8% over the last month. This had the effect of boosting the prospective distribution yield on offer.
APA is expecting to pay a distribution of 53 cents per security in FY22. This translates to a yield of around 6.2%.
The business has a large energy asset base, across gas pipelines, other gas infrastructure and renewable energy.
APA is steadily investing into the theme of energy transition. Within the current business, it is working on the Gruyere Hybrid Energy Microgrid, Mica Creek Solar Farm and the Parmelia Hydrogen Project.
In total, the ASX dividend share has a growing pipeline of more than $1.3 billion. These projects are expected to increase APA's cashflow, which is what it funds the distribution (and growth) with.
APA believes there are large growth opportunities in renewables and firming, electrification and hydrogen infrastructure across Australia. To 2040, APA sees $68 billion of investment opportunities in the country, including more than $40 billion in renewables, firming and storage. It also sees more than $20 billion of electrification (mostly transmission) opportunities and $8 billion in gas pipeline infrastructure.
The energy giant is also looking at the US, where the overall opportunities are a huge multiple larger than in Australia. There's also the potential of the hydrogen economy that APA could be involved with.
