I love being a dividend investor because of how ASX shares can reward us with real cash payments simply for owning a piece of them.
Businesses are doing their best every year to make a profit for investors and hopefully grow earnings. It's the earnings that fund the passive income, so investors should pay close attention to what the business is doing, its industry and its outlook.
I like to regularly talk about some of my favourite ASX dividend shares, such as Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and MFF Capital Investments Ltd (ASX: MFF), but there are a number of businesses that are impressive and worth monitoring, including the two below.
Nick Scali Limited (ASX: NCK)
Nick Scali is a furniture company with three different businesses – Nick Scali, Plush and its UK business.
I'm very excited about what the company could achieve in the UK because of how much larger the population is, giving it a bigger total addressable market. The Australian population is closing in on 28 million, while the UK population is more than 68 million.
At the end of the FY25 first half period, it had 109 Australian stores and 20 UK stores.
Management think the business can reach at least 176 Australian stores, implying possible growth of more than 60% from what it had in December. I'm optimistic about what the business could achieve with its UK operations.
It's rebranding its UK stores to Nick Scali, and its top-selling Nick Scali ANZ product is now the top-selling product in the UK, which bodes well for Nick Scali's product range being transferable to the UK, in my opinion.
Turning to the passive income for dividend investors, impressively, the business grew its annual dividend every year between 2013 and 2023. I think Australian and UK store count growth (and central bank rate cuts) will help grow its profit substantially in the next three years. It currently offers a grossed-up dividend yield of 4.7%, including franking credits.
APA Group (ASX: APA)
I think APA is one of the most underrated ASX dividend shares. It's an energy infrastructure business with a huge gas pipeline that transports half of the country's gas usage. It also owns other gas-related infrastructure, renewable energy generation and electricity transmission assets.
It's the type of business that generates dependable cash flow every year – energy is always in demand. Plus, a large majority of its revenue is linked to inflation, so it sees regular increases of its top line.
APA is also consistently adding to its portfolio, whether that's gas-related or electricity-related, through both organic expansion and acquisitions.
Dividend investors will appreciate knowing that it has increased its annual distribution every year for 20 consecutive years, which is the second-best record on the ASX. I think reliability is underrated by investors considering how important passive income is for some Aussies to pay for their lifestyle.
Its FY25 annual distribution guided to rise 1.8% to 57 cents per security, which translates into a distribution yield of 6.8%. I think this is especially attractive for dividend investors.
