Choosing ASX dividend shares gets harder when the cash rate is looking like increasing.
All four major banks now expect the Reserve Bank to tighten again this year.
A term deposit paying close to 5% becomes a competitor for income money.
The three companies below each deal with that problem in different ways.
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1. Macquarie Group Ltd (ASX: MQG)
Macquarie Group is the one of the few companies that benefits from higher rates.
The company earns on client cash balances, and its markets businesses tend to do better when volatility rises.
FY26 net profit rose 30% to $4.85 billion and earnings per share climbed 30% to $12.77.
Return on equity recovered to 14.0% and assets under management reached $748 billion.
The full-year dividend was $7.00 per share, though franked at only 35%.
Today, the shares trade on a price-to-earnings ratio near 19.9 with a 2.78% yield.
The trade-off is a dividend that grows with earnings.
2. Transurban Group (ASX: TCL)
Transurban Group is the classic rate-sensitive income stock, and it has been treated accordingly.
The shares closed at $13.63, within a few cents of a 52-week low, and are down 4.82% over twelve months.
The trailing yield is 5.01%.
Despite all of this, the company's operating result was solid.
Proportional toll revenue rose 6.7% to $3,982 million and proportional EBITDA rose 7.5% to $3,063 million.
Free cash increased 5.1% to $2,111 million.
The FY26 distribution was 69.0 cents per security, up 6.2%, and management has guided to 72 cents in FY27.
Proportional drawn debt sits at $27.1 billion with gearing of 37.4%.
The weighted average cost of Australian dollar debt is 4.8% and 87.8% of debt is hedged.
That hedging is what buys the company time if rates keep climbing.
Toll escalation is linked to inflation, so the same forces pushing rates higher also lift Transurban's revenue.
Chief executive Michelle Jablko noted that despite the macroeconomic backdrop the group's roads proved relatively resilient through the year.
3. APA Group (ASX: APA)
APA Group has been the best performer of the three, rising 22.23% over twelve months to $10.83.
The company's dividend yield is 5.32%, though franked at only about 31%.
FY26 underlying EBITDA rose 8.3% to $2,183 million, above the midpoint of guidance.
Free cash flow rose 3.2% to $1,118 million and the distribution lifted 1.8% to 58.0 cents per security.
FY27 guidance calls for EBITDA of $2,260 million to $2,340 million and a 59.0 cent distribution.
The organic growth pipeline has expanded to roughly $3.5 billion.
Chief executive Adam Watson summed it up.
Our underlying earnings were up 8.3% and above the mid-point of guidance, supported by new assets and ongoing strong operational performance.
The catch is the price.
Brokers are split between hold and sell ratings, with an average target below the current share price.
Foolish takeaway
The instinct when rates rise is to sell every yield stock in sight.
That is too blunt, because these three respond to the same cash rate in opposite directions.
I would rather own a 5% distribution that grows with inflation than a term deposit that does not.
Transurban is the ASX dividend shares idea I find most interesting today, purely because the market has already marked it down.
Macquarie is the one I would be happiest holding if the Reserve Bank continues to look to increase rates.
