Building a second income could be exactly what many working Australians aspire to do. Passive income from ASX shares can help bolster or even entirely replace wage earnings.
We can only earn so much from our work earnings each year. How good would it be to have more money to spend on discretionary areas or allow us to work less?
Share investing is very scalable – owning more shares doesn't mean spending more time managing them. Owning a bigger property portfolio can mean dealing with more maintenance issues, more bills and more tenants.
Investing in ASX shares can just tick along in the background. There are two ASX share names that have been growing their annual dividend payout every single year for more than 20 years! I think they're great options for a second income.
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APA Group (ASX: APA)
APA is one of the largest energy infrastructure businesses on the ASX with a large portfolio of assets, including a national network of gas pipelines, wind farms, solar farms, gas-powered energy generation and electricity transmission.
I like how the business is steadily building its portfolio so that it can generate more cash flow and fund a larger payout.
For example, it recently announced that it expects to add approximately 30% additional gas transport capacity to its east coast gas grid and address projected southern market gas shortfalls from 2028. Its expansion plan includes $480 million of capital expenditure.
The business has increased its annual distribution every year since 2004, which is an excellent record of consistent growth.
It's expecting to increase its annual distribution per security by 1 cent per security in FY26 to 58 cents per security. This translates into a distribution yield for FY26 of 6.3%, which is a solid starting yield.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Patts is by far the leading pick for building a second income, in my view.
It's not just a single business – it's an investment house that owns a portfolio of assets across a range of industries including resources, telecommunications, swimming pools, agriculture, industrial properties, building products, financial services and plenty more.
By owning this diversified portfolio, it has created an array of avenues to receive cash flow which is used to pay for its expenses, deliver a rising dividend each year and re-invest the rest into more opportunities.
The company has paid a dividend to shareholders every year since it listed in 1903, including through the wars, global pandemics, recessions and so on. That's a great level of commitment to giving investors passive income each year.
Soul Patts has increased its annual payout each year since 1998, meaning it's getting close to three decades of continuous dividend growth.
Each year, the ASX share adds to its portfolio which can help grow its payout for shareholders.
I'm expecting the business to pay an annual dividend per share in FY26 that equates to a grossed-up dividend yield of 4.1% in FY26, including franking credits. I think that's a good starting point with the yield.
