APA Group (ASX: APA) shares could be one of the best options for passive income on the ASX. Given that status, I think it's one of the leading options for retirees to consider.
If I were a retiree, I'd want to focus on ASX shares I'm highly confident would keep paying, even during rough times. When a business already has a track record of delivering rising payments through lean economic times, I think that could be a useful indicator of what could happen in the next downturn.
APA is a large energy infrastructure business with a number of assets including a huge national network of gas pipelines, gas processing, gas storage, gas power stations, solar farms, wind farms, batteries and electricity transmission.
With that in mind, let's look at what makes it so appealing for retirees.
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Growing distributions
In my view, APA has the second-best record on the ASX for consecutive years in a row of passive income growth. It has increased its payout 22 times in a row.
In other words, the business has been hiking its distribution going back to before the GFC in the late 2000s. If a company can grow its payout during the GFC and every year since, I think it's a very compelling ASX option for reliable dividends.
The business has guided that it will grow its FY27 distribution by another 1.7% to 59 cents per security. That'll be the 23rd year in a row that the business has grown its payout, which retirees can love.
Good dividend yield
There are some S&P/ASX 200 Index (ASX: XJO) shares that regularly grow their dividend, but the dividend yield is quite low. APA shares provide investors with a significant distribution yield.
If we look at the projected payout for FY27, the potential dividend yield is likely to be pleasingly high.
At the time of writing, the forecast payout translates into a distribution yield of 5.1%. That's competitive with what term deposits are currently offering.
Growth of cash flow
APA funds its distributions from the cash flow that its portfolio of assets generates.
There are two elements that are supporting larger increases.
First, nearly all of its revenue is linked to inflation, so there's a steady increase for APA.
Second, it's regularly expanding its portfolio of assets with extended pipelines, building new assets and the occasional acquisition.
In FY26, it noted $546 million of capital investment in growth projects, including the Brigalow peaking power plant and pipeline, the East Coast gas grid expansion and the Sturt Plateau Pipeline. It now has an organic growth development pipeline of around $3.5 billion. It has longer-term opportunities beyond that current pipeline, too.
Overall, there's a lot to like with ASX shares for retirees.
