Term deposits don't offer the growth that I want over the long-term. S&P/ASX 200 Index (ASX: XJO) shares can provide investors with resilient passive income and growth of the payments.
It's true that term deposits will protect capital, but they don't grow the capital value either.
I think it could be a better move for the long-term to own growing businesses that are likely to provide reliable passive income as the years go by. Let's look at two of my ideas.
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Centuria Industrial REIT (ASX: CIP)
I think real estate investment trusts (REITs) are a good industry to look for opportunities because of how they have rental contracts (usually multi-year contracts), and the capital value of the buildings usually doesn't change much year to year.
This ASX 200 share is particularly attractive because it is exposed to a number of tailwinds that are driving demand for industrial space. Those drivers include increasing e-commerce adoption, the growth of fresh food and pharmaceuticals, data centres, the onshoring of supply chains, a limited supply of new warehouses, and the growth of Australia's population.
The business has guided that it will grow its funds from operations (FFO) – the net rental profit – by up to 6% to between 18.2 to 18.5 cents per unit. The business is expecting to increase its distribution by 3% to 16.8 cents per unit, translating into a forecast distribution yield of 5%.
Grant Nichols, the ASX 200 share's fund manager, said:
CIP continues to achieve strong outcomes across its portfolio relating to leasing, capital transactions and value add initiatives. The ability to deliver these results is credited to CIP's portfolio being concentrated in Australia's urban infill markets where tenant demand is strongest, vacancy is low and supply is constrained.
These urban infill assets provides multiple future opportunities for alternative, higher-use developments such as data centres and residential schemes.
APA Group (ASX: APA)
APA is an impressive energy infrastructure business that owns a vast gas pipeline network – it transports half of the country's gas usage. Other gas assets include gas processing, gas storage and gas-powered energy generation.
It also has wind farms, solar farms and electricity transmission assets.
The ASX 200 share is seeing long-term cash flow growth from an expanding portfolio of assets, which is helping pay for a distribution that has been hiked every year for the last two decades. That's an excellent record of reliability.
APA is benefiting from the fact that a vast majority of its revenue is inflation-linked, giving the business a useful tailwind for its top-line.
While a lot of its new assets in recent years have been pipelines, though it also announced a new power plant.
It's expecting to increase its payout to 58 cents per unit in FY26, translating into a forward distribution yield of 6.6%.
