The S&P/ASX 200 Index (ASX: XJO) stock APA Group (ASX: APA) is a high-quality passive income option for investors who are focused on ASX dividend shares.
I'd say the business is known for providing a big dividend yield and it has one of the longest growth streaks on the ASX.
The business has increased its annual payout every year for two decades, thanks to the rising cash flow generated by its portfolio of energy assets. Its main asset is a huge gas pipeline connecting various sources of supply with population centres.
Its other assets include gas processing facilities, gas storage facilities, gas energy generation, solar farms, wind farms, batteries and electricity transmission assets.
I believe this business is likely to continue delivering further passive income growth in the coming years, making it a strong contender for generating thousands of dollars of passive income. Let's look at how that can become reality.
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How to make $250 a month of passive income
The business pays a distribution every six months, which, on the face of it, isn't monthly income. To reach a monthly goal, I would think of an annual target and then divide it into 12 equal amounts.
Achieving $250 per month translates into an annual goal of $3,000.
The ASX 200 stock has announced its FY25 annual payout is 57 cents per security for FY25, which translates into a FY25 distribution yield of 6.8%.
If we owned 5,264 APA shares, we'd receive $3,000 of annual passive income, based on the announced payout.
The projection on Commsec suggests the business could grow its payout to 58 cents per security in FY26. This would be a dividend yield of 6.9% and generate $3,053 of annual passive income.
A good time to invest in the ASX 200 stock?
The assets APA owns are benefiting from revenue being linked to inflation, which is an organic tailwind for both the top and bottom lines of the company's financials. This is typically a significant help in pushing the distribution higher over the years.
The business may also be a significant beneficiary from the RBA rate cuts, which could lower the cost of the sizeable debt on its balance sheet. On top of that, investors may be more drawn to APA after further rate cuts because of its high dividend yield, its predictable cash flow and the ongoing growth of the asset base.
APA regularly expands its national gas network with new pipelines and also makes acquisitions in areas like electricity transmission.
Overall, I think this is a solid ASX 200 stock and could be one of the most reliable passive income payers for the foreseeable future.
