S&P/ASX 300 Index (ASX: XKO) shares can be the perfect candidates to help grow dividend income.
I'm a fan of receiving a solid dividend yield from an investment, but I'd also want to know that they can provide growth for investors over time as well.
Rising dividend payments are a good sign that the company is growing its underlying value, which is typically demonstrated through rising earnings.
Plus, larger payouts mean our finances benefit from higher profits. With that in mind, the two businesses below look compelling for both defensive earnings and rising dividends.
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Centuria Industrial REIT (ASX: CIP)
This ASX 300 share describes itself as Australia's largest domestic pure play industrial real estate investment trust (REIT). It owns industrial assets across Australian cities, with a quality and diverse tenant base.
Rental earnings are typically defensive and I think industrial properties are even more defensive than sectors like office buildings or shopping centres. Plus, the Centuria Industrial REIT's tenants are signed on for relatively long leases, with a weighted average lease expiry (WALE) of around seven years.
The business is benefiting from solid rental growth – in FY25, it delivered like-for-like net operating income (NOI) growth of 5.8%. It's benefiting from low vacancy rates across Australian cities thanks to Australia's rising population, increasing e-commerce adoption, data centre requirements and other areas of demand.
The ASX 300 share is expecting to grow its operating earnings (FFO) per unit by up to 6% in FY26, helping fund distribution growth of 3% to 16.8 cents per unit. That translates into a potential distribution yield of 4.75%.
Propel Funeral Partners Ltd (ASX: PFP)
Propel is the second largest funeral provider in Australia and New Zealand. At the last count, it had 205 locations, including 41 cremation facilities and nine cemeteries.
As the saying goes, there are only two things certain in life – death and taxes. And we can't invest in the Australian Taxation Office (ATO).
Sadly, as morbid as it is, there are a number of funerals required each year and that's expected to increase in the coming years.
According to Propel, death volumes are expected to increase by 2.8% per annum from 2025 to 2035 and 2.4% per annum between 2036 to 2045. In New Zealand, death volumes are expected to increase 1.9% per annum between 2025 to 2035 and then rise 1.8% per annum between 2036 to 2045.
Combined with a rising average revenue per funeral (which has increased at a compound annual growth rate (CAGR) of 3.1% since FY15), I think Propel's operating earnings and dividend are likely to rise in the coming years.
In FY25, the business paid an annual dividend per share of 14.4 cents, so its trailing grossed-up dividend yield is 4.1%, including franking credits. That's a solid starting point, in my view, and the ASX 300 share could deliver much more growth in the coming years.
