Some ASX dividend shares get a lot of attention, like BHP Group Ltd (ASX: BHP). Plenty of others seem to be going under the radar – they may be underestimated as options for passive income even though they have large potential dividend yields and could deliver payout growth.
A business that can provide a sizeable dividend and growth may be a winning combination because it could be more attractive than a term deposit and also provide inflation protection.
I'm not going to talk about ASX bank shares or ASX mining shares. A lot of investors probably already have exposure to those sectors. I don't know how much profit growth those sectors can achieve in FY25 amid a falling iron ore price and shrinking net interest margins (NIMs).
Instead, I'm going to talk about two ASX dividend shares that could deliver growth and are not highly followed.
Inghams Group Ltd (ASX: ING)
According to UBS, Inghams is Australia and New Zealand's largest integrated poultry producer, with a market share of approximately 39% across both markets. It sells products to a number of customers, including supermarkets, fast food operators, food service distributors, and wholesalers.
The Inghams dividend and profit took a hit during FY22 due to inflated costs. However, the dividend is now recovering and is expected to keep rising.
Broker UBS forecasts that Inghams could pay an annual dividend per share of 20 cents in FY24. That translates into a forward grossed-up dividend yield of 7.8%.
The broker thinks Inghams can steadily grow profit and the dividend over the next few years, suggesting the dividend per share can rise to 22 cents per share in FY25 and 24 cents per share in FY26. This translates into forward grossed-up dividend yields of 8.6% and 9.3%, respectively.
The ASX dividend share's earnings recovery is being driven by "improved operational performance (especially in NZ) but also successful implementation of average selling price increases" of approximately 8% year over year.
UBS suggests an increase in demand from at-home consumption through supermarkets more than offsets the weakness in the fast food and food service channels. The broker says its view is "supported by strong population growth in Australia/New Zealand and the greater value proposition that poultry provides relative to red/pink meat."
APA Group (ASX: APA)
APA is one of the largest infrastructure businesses in Australia, with a large portfolio of energy assets that it owns or operates. That includes a large national gas pipeline around Australia, which transports half of the country's usage.
The ASX dividend share also has stakes in gas infrastructure assets (processing, storage and gas-powered energy generation).
APA owns various electricity-related assets, including solar farms, wind farms, and transmission.
Impressively, the ASX dividend share has grown its distribution every year since 2004, which is one of the longest growth streaks on the ASX.
The business decided on a distribution of 56 cents per security, representing a 1.8% year-over-year increase. At the current APA share price, this represents a distribution yield of 7.1%.
The forecast on Commsec suggests that the pay could grow to 57 cents per security in FY25 and 58 cents per security in FY26. This translates into forward distribution yields of 7.3% and 7.4%, respectively.
Growth can come from several different sources, including expanding its portfolio further with additional pipeline projects, adding more electricity-related assets (particularly transmission), and organic revenue growth. A large majority of the ASX divided share's revenue is linked to inflation, so this recent period has been helpful for revenue growth.
