I think APA Group (ASX: APA) is one of the unsung high-yield dividend heroes of the S&P/ASX 200 Index (ASX: XJO). It certainly counts as a high-yield stock in my opinion.
APA doesn't get the same level of attention as large ASX dividend shares like Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP) or Woodside Energy Group Ltd (ASX: WDS). I think APA is a much stronger passive income option than those names.
For investors that haven't heard of APA, it's an energy infrastructure giant that's invested in a number of different assets.
The key earnings generator is a huge gas pipeline network across Australia, but it also owns gas processing facilities, gas storage assets, a gas power station, electricity transmission, wind farms and solar farms.
I like APA's diversification strategy across a number of areas. Impressively, it transports half of the nation's gas usage – it's an important part of the Australian energy system. Let's look at how much passive dividend income a $20,000 investment could deliver.
$20,000 investment into this high-yield ASX 200 share
This business has one of the best records on the ASX – it has hiked its annual payout every year for the last 20 years in a row. That's the second-longest growth streak on the ASX!
Payout growth isn't guaranteed to continue forever, but increases do look likely for FY26 and beyond.
APA has provided guidance that it intends to increase its payout to 58 cents per security in FY26, translating into a forward distribution yield of 6.2%.
If someone was to invest $20,000 into the high-yield ASX 200 share, it would unlock approximately $1,240 of annual income in FY26. Of course, that would just be the payout in the first year. I believe APA is likely to increase its payout to at least 59 cents per security in FY27 and 60 cents per security in FY28.
Why I expect further dividend income growth
I like the steady approach to its payout growth because it ensures the business has enough cash to continue investing in new assets.
For example, it announced at the start of December that it's going to work with CS Energy to develop and own 80% of the proposed Brigalow Peaking Power Plant in Queensland. APA now has a $2.1 billion organic growth pipeline, which will add to cash flow generation once it has been completed, enabling larger payouts.
Gas could become an increasingly important part of baseload power as coal power plants turn off in Australia over the coming decade, so APA's gas assets could become even more important than they already are. I'm optimistic that the business can continue to grow its distribution over the coming years.
