The ASX dividend stock APA Group (ASX: APA) has suffered a large sell-off. It's down 19% in the past year, and down 30% from August 2022, as we can see on the chart below.
For readers who haven't heard of this large infrastructure business, it's the owner of a very large gas pipeline network around Australia. APA transports half of the country's natural gas usage.
It also owns or has interests in gas storage facilities, gas-fired power stations and renewable energy generation (solar and wind).
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Attractive dividend yield
Large swathes of the ASX share market have gone up in recent months, pushing plenty of names to near all-time highs. This has the unfortunate effect of pushing down the dividend yield.
However, with the lower APA share price, it has seen its distribution yield increase.
A falling share price of a normal ASX dividend stock can be a warning sign of a potential falling profit and dividend cut. But, APA has increased its distribution every year since 2004, and I think this streak can continue.
The business is expecting to pay a distribution per security of 56 cents in FY24, which would be an increase of 1.8% compared to FY23. This payout would translate into a distribution yield of 6.8%.
Ongoing income growth
APA's distribution is paid for by the ASX dividend stock's cash flow, with revenue being a key driver.
A large majority of APA's revenue growth is linked to inflation. The last couple of years of high inflation have led to accelerated revenue for the business.
In the FY24 first-half result, revenue increased 3.4% to $1.27 billion, but the 'segment revenue' increased 8.2% to $1.27 billion. This helped underlying earnings before interest, tax, depreciation and amortisation (EBITDA) grow 5.8% to $930 million and free cash flow increased 12.8% to $546 million.
APA is also working hard on growing its pipeline, with bolt-on projects. Each new project can grow its cash flow once it's completed.
The business is also steadily growing its portfolio of renewable energy and electricity transmission assets.
Foolish takeaway
I don't think this business is going to deliver huge capital growth, but I believe it is very capable of delivering ongoing rising annual distributions, which would be a very useful characteristic in an uncertain world, particularly if interest rates start being cut in the next 12 months.
With a large starting yield and a growing payout, I think the business is an appealing ASX dividend stock, along with others.
