3 ASX dividend shares I think are the safest buys right now

I'm tipping there will likely be dividend growth from these three stocks.

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Key points

  • Sonic Healthcare is seeing ongoing underlying revenue growth and its progressive dividend growth continues
  • APA’s energy infrastructure portfolio continues to grow, creating larger cash flow and bigger dividends
  • Propel is seeing more volume and stronger pricing for funerals, which is boosting revenue, earnings, and its dividend

No ASX share is truly 'safe' – share prices can go down and dividends can be cut. This article is going to talk about three ASX dividend shares I'm expecting bigger dividend payments from in FY23. As such, I think they're a relatively safe chance of paying out good passive income.

Businesses that have already paid investors many dividend increases may be quite likely to keep doing so if they're in the right industry.

I normally write about Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and Brickworks Limited (ASX: BKW) when it comes to consistent dividend growth. But in this article, I'm going to cover another three.

That said, I'd say the five stocks I'll mention in this article are among the 'safest' ASX All Ordinaries (ASX: XAO) shares when it comes to expected dividend growth in FY24 and the foreseeable future.

Sonic Healthcare Ltd (ASX: SHL)

Sonic Healthcare is one of the largest pathology businesses in the world, with sizeable operations in Australia, the US, the UK, and Germany. It has recently been on an acquisition spree in Germany. This is helping grow its scale in Europe, diversifying its overall earnings and boosting net profit after tax (NPAT).

The ASX dividend share has a stated progressive dividend growth policy. Its base business revenue, which excludes COVID-19 testing, continues to grow. I think this is a good tailwind for ex-COVID-testing earnings — and the dividend — to keep rising.

Organic growth and acquisitions can help the business continue to grow. According to Commsec estimates, the FY23 grossed-up dividend yield could be 4.3% in FY24. It has grown its dividends most years over the last 25 years.

APA Group (ASX: APA)

APA is a large energy infrastructure ASX dividend share. It has a growing portfolio of natural gas infrastructure, including a large national pipeline, as well as a small but growing group of renewable energy generation assets.

The business has grown its dividend every year since 2004, which is one of the longest growth streaks on the ASX. APA funds the larger shareholder payouts thanks to its growing cash flow.

A large majority of its revenue is linked to inflation, which is getting a strong boost during the current period. It delivers half of the country's natural gas and with Australia's population continuing to grow, I think energy demand is going to keep rising.

It's expecting to pay an annual dividend per share of 55 cents per security in FY23, an increase of 3.8% compared to FY22. This estimated payout translates into a forward dividend yield of 5.7%.

Propel Funeral Partners Ltd (ASX: PFP)

There's a saying that only two things in life are certain: death and taxes. We can't invest in the Australian Taxation Office (ATO), but we can invest in the funeral provider Propel Funeral Partners, the second-largest player in the industry.

After COVID-19 disruptions, the company is seeing a return to normal volumes, as well as getting an inflation boost to the average price per funeral. In the FY23 half-year result, average revenue per funeral grew 7.5% to $6,346 and the number of funerals performed rose by 14%.

The ASX dividend share's HY23 total revenue rose by 23%, while operating net profit after tax (NPAT) went up by 34.9%. The interim dividend was increased by 18% to 7.1 cents per share.

Commsec numbers suggest that Propel's FY24 annual dividend per share could rise to 14.5 cents, which would be a grossed-up dividend yield of around 5%.

Motley Fool contributor Tristan Harrison has positions in Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Apa Group, Brickworks, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Propel Funeral Partners and Sonic Healthcare. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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