Building a reliable passive income stream doesn't have to mean chasing the ASX dividend shares with the highest yields.
In fact, some of the best income investments are businesses that combine attractive payouts with the ability to grow those payments over time. That's especially important for retirees, who need their income to keep pace with inflation.
With that in mind, here are two ASX dividend shares I think deserve a closer look.
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APA Group (ASX: APA)
APA Group has built one of the strongest income records on the ASX.
The ASX dividend share has increased its annual distribution every year since the mid-2000s, giving it one of the longest uninterrupted distribution growth streaks on the market. Only Washington H. Soul Pattinson and Co Ltd (ASX: SOL) has a longer record among major ASX companies.
APA expects to pay an annual distribution of 58 cents per security for FY26. At today's share price, that equates to a distribution yield of around 5.7%, making it highly competitive with even the best term deposit rates.
And the income story may not stop there. It's expected that APA will increase its annual distribution again in FY27 to around 59 cents per security, lifting the forward yield to approximately 5.8%.
Importantly, APA isn't funding those distributions by standing still.
The company continues investing heavily in projects that should support higher cash flows over time. It is expanding its East Coast gas grid, progressing early works in the Beetaloo Basin, growing remote power generation in the Pilbara, and building a new gas peaking power station in Queensland.
At its FY26 half-year result, APA reported an organic growth pipeline worth around $3 billion. Those investments should help grow earnings over the coming years and support further distribution increases.
AGL Energy Ltd (ASX: AGL)
AGL offers a different type of income opportunity.
The ASX dividend share has fallen around 11% so far in 2026 and remains roughly 20% below its February highs, leaving investors with an attractive dividend yield of approximately 5.7%.
Even better, AGL's recent dividends have been fully franked, lifting the grossed-up yield to around 8% for eligible investors.
The business also benefits from operating in an essential industry. Regardless of economic conditions, households and businesses still need electricity and gas. That helps underpin demand for AGL's services and provides a relatively defensive earnings base.
However, investors also need to understand the risks. Australia's energy sector is undergoing one of the biggest transformations in its history. Coal-fired power stations are progressively being retired and replaced by renewable energy generation and large-scale battery storage.
AGL sits at the centre of that transition. The company must invest billions of dollars to modernise its generation fleet while navigating government regulation, wholesale electricity price volatility, and the complexities of the National Electricity Market.
Those challenges create uncertainty, but they also provide opportunities if management executes successfully.
