ASX dividend investors will want to know about the ASX utility stocks I'm going to talk about because of the dividend yields they offer and the potential growth they could achieve.
Investors should focus on more than just what income a business can pay – the valuation and the earnings growth are also important.
Utility ASX shares may be seen as more defensive because of the consistent demand for their essential services and the predictable cash flow they produce.
With that in mind, here are three top Aussie utility stocks that could be options in December 2023 for longer-term income.
AGL Energy Limited (ASX: AGL)
AGL is one of the biggest ASX energy shares – it has energy generation assets and a large customer base.
In the last few years, AGL's profit and dividend have suffered from lower energy wholesale prices and weakness in its power plant availability.
The AGL dividend has fallen heavily since 2019, but 2023 saw the start of a recovery – the AGL dividend rose 19% to 31 cents per share.
Higher wholesale prices and better power plant availability could see AGL's underlying net profit more than double in FY24.
The dividend is expected, according to the projection on Commsec, to increase by 71% to 53 cents per share. If that payment happens, the AGL dividend yield could be 5.5%. And it could be a 7.9% grossed-up dividend yield if the dividend is fully franked.
Chorus Ltd (ASX: CNU)
Chorus describes itself as the largest telecommunications infrastructure business in New Zealand. It maintains and builds a network predominantly made up of local telephone exchanges, cabinets, and copper and fibre cables. Expanding the fibre cable network and getting more New Zealanders to sign up to faster internet are two of the key goals of the business.
This is the kind of business that can achieve steady and growing profit because of the growing demand for a good internet connection.
In FY23, the business paid a dividend per share of NZ 42.5 cents and the company's board has provided guidance of NZ 47.5 cents per share for FY24. In Australian dollar terms, that translates into a dividend yield of 6.2%.
APA Group (ASX: APA)
APA is a large energy infrastructure business that owns a large pipeline across Australia, which transports half of the country's gas usage. It also has a growing portfolio of renewable energy generation and electricity transmission assets.
The business pays distributions from its cash flow, and each completed asset (such as a new pipeline) adds to the cash flow.
It has grown its distribution every single year going back to 2004, making it one of the longest-running consecutive growth streaks, which is good for ASX dividend investors.
In FY24, it's expecting to pay a distribution per security of 56 cents. At the current APA share price, that translates into a forward distribution yield of 6.5%.
