The three ASX dividend shares I'm going to cover look like passive income beasts to me.
When I think about the types of investments I'd want to own in retirement, I would choose ones with strong dividend track records that could keep paying good dividends even during a downturn.
Dividends are not guaranteed. Dividend payouts can be reduced or cut altogether.
But, I think the businesses that have built a track record of growth – and seem like they can keep increasing the payment – makes me more interested in those names.
APA Group (ASX: APA)
APA is an energy infrastructure business that owns thousands of kilometres of natural gas pipelines around Australia. It delivers half of the nation's natural gas usage. The business also owns or has stakes in, gas storage, gas processing and a gas power plant.
This ASX dividend share is also getting involved with the renewable energy transition. It owns solar and wind-generating assets, as well as electricity transmission assets.
Why should it be considered a passive income beast? It has increased the distribution to investors each year for over a decade and a half. That's one of the longest currently-running dividend growth streaks on the ASX.
I think energy will continue to be in demand for beyond the foreseeable future, and APA will be involved with that. It will be particularly useful if APA is successful at being able to start transporting hydrogen in its pipelines, which could lengthen the useful life of its assets and make it even greener-focused.
The estimated distribution for FY23 of 55 cents per security, translates into a forward yield of 5.5%.
Rural Funds Group (ASX: RFF)
Rural Funds is probably my favourite real estate investment trust (REIT) on the ASX.
This ASX dividend share owns a diversified portfolio of farming properties that it leases out to large, quality tenants like Treasury Wine Estates Ltd (ASX: TWE), Select Harvests Limited (ASX: SHV) and Australian Agricultural Company Ltd (ASX: AAC).
A lot of its rental income grows through either a fixed 2.5% annual increase, or it's linked to CPI inflation, with some contracts having an occasional market review. This organic rental growth each year helps Rural Funds grow its distribution by the targeted 4% per year.
The farms are spread across different states and climate conditions to lower risks. But, the passive income beast does own a lot of water entitlements for tenants to use.
I like that the tenants take on the operational risk of the farms, and Rural Funds can benefit from the ultra-long-term growth in the value of farmland and rent.
The business is expected to pay a total distribution of 12.2 cents per share in FY23, which translates into a yield of 6%. However, higher interest rates are a shorter-term headwind for its profit and farm valuations.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
For me, Soul Pattinson could be the best passive income beast in terms of its dividend growth – it has increased its annual ordinary dividend every year since 2000. That's the longest growth streak on the ASX.
It operates as an investment conglomerate, which means its job is to invest in other businesses and assets. This includes ASX blue chips, ASX small-cap shares, private equity, and structured debt.
Some of its biggest investments include Brickworks Limited (ASX: BKW), TPG Telecom Ltd (ASX: TPG), New Hope Corporation Limited (ASX: NHC), Tuas Ltd (ASX: TUA), Pengana Capital Ltd (ASX: PCG) and Aeris Resources Ltd (ASX: AIS). It also has large stakes in names like Macquarie Group Ltd (ASX: MQG), BHP Group Ltd (ASX: BHP), CSL Limited (ASX: CSL) and Wesfarmers Ltd (ASX: WES).
It continues to invest in agriculture. The latest investment includes $118 million spent on citrus farms. The private investment Ampcontrol (an electrical parts business) and swimming school business called Aquatic Achievers are assessing acquisition opportunities.
In the FY23 half-year result, it increased its dividend by 24% to 36 cents per share. That makes the current ordinary grossed-up dividend yield around 4%.
