We recently compiled a list of the Top 10 ASX Dividend Stocks Heading into 2025. In this article, we are going to take a look at where APA Group (ASX:APA.AX) stands against the other ASX dividend stocks.
Analysts often advise investors to diversify their stock portfolios globally to optimize returns. With this in mind, strong markets should be a key focus. Australia’s stock market is expected to perform well in 2025, driven by positive sentiment from potential central bank easing and China’s commitment to supporting its mining sector. Year-to-date, the Australian benchmark index has climbed nearly 8%, with a 12-month gain of around 9%. This was buoyed by the strong rally in the US equity markets, drawing increased attention from investors. The growth has also been led by technology and financial stocks, with the banking sector on track for its best performance since 2009. However, mining and energy stocks have faced challenges due to weaker commodity prices.
According to a report by BlackRock, broad Australian equities have been the second most favored investment within iShares’ local offerings this year, trailing only broad US equities. As of November 2024, they have attracted nearly $840 million in net inflows.
Also read: 13 Best Dividend Stocks to Buy Under $50
Banking stocks in the country made a remarkable impression in 2024, with a sectoral index surging over 30%, as of December 18—its strongest performance in 15 years—thanks to prolonged elevated interest rates. However, as the Reserve Bank of Australia gears up for potential rate cuts, banks may encounter earnings pressure due to tighter net interest margins, a crucial measure of profitability, and heightened competition. In addition, Australian lenders rank among the priciest globally, with the sector’s price-to-earnings ratio outpacing that of their international counterparts, as per Bloomberg data.
Analysts suggest that Australian resource stocks could gain from Beijing’s promise to boost government spending. However, local mining shares are heading for their weakest performance since 2015, weighed down by the ongoing slump in China’s property market, which continues to impact commodity prices. Morgan Stanley analysts including Rahul Anand said the following in a Dec. 15 note:
“As the market awaits visibility on tariff risk versus China stimulus benefits, we see opportunities for exposure to resources. Despite higher-than-normal iron ore inventories, steel inventories in China remain lower than 2019 levels creating iron ore restock opportunity.”
The Reserve Bank of Australia (RBA) projects that economic growth in Australia will rise modestly to about 1% by the close of 2024 and reach its typical pace of around 2.5% by late 2025. This recovery is expected to be largely driven by government spending, which has provided stability to the economy as higher interest rates have dampened private consumption. Analysts suggest that index investing offers an effective and efficient way to tap into the Australian market’s growth potential. S&P Global data revealed that nearly 70% of actively managed Australian equity funds have lagged behind the benchmark index over a three-year period. Over a 10-year timeframe, the disparity is even greater, with over 80% of managed funds underperforming the index. While active stock picking can complement a portfolio, they argue that tracking the benchmark might be one of the best strategies for investors seeking straightforward, long-term exposure to the growth of the local equity market.
Our Methodology:
For this list, we used a screener to identify ASX stocks. From there, we selected dividend stocks with strong histories of regularly rewarding shareholders with dividends. Then, we picked the top 10 stocks with the highest dividend yields as of December 25. The stocks are ranked in ascending order of their dividend yields.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
An executive at a podium highlighting the company’s impact on the global infrastructure markets.
APA Group (ASX:APA.AX)
Dividend Yield as of December 25: 6.67%
APA Group (APA.AX) is an Australian infrastructure business company, headquartered in New South Wales. The company mainly owns and operates natural gas and electricity assets. It manages a diverse range of energy assets, including a vast national gas pipeline network, gas processing plants, gas-fired power generation facilities, solar and wind farms, and electricity transmission infrastructure. Notably, it is responsible for transporting half of the country’s total gas consumption.
InFY24, APA Group (APA.AX) reported revenue of $2.6 billion, up 8% from the same period last year. This revenue growth was fueled by strong performance in Energy Infrastructure, a full-year contribution from Basslink, and the initial impact of the new Pilbara Energy System. The Pilbara business is delivering results consistent with the expectations set during its acquisition.
In addition, APA Group (APA.AX) also showed a strong cash position. The company generated $1.07 billion in free cash flow, up 0.3% from the prior-year period. Its total assets amounted to $19.5 billion, growing by 23.3% from the same period last year.
APA Group (APA.AX)’s strong performance allowed the Board to declare a final distribution of 29.5 cents per security, bringing the total FY24 distribution to 56.0 cents, aligning with prior guidance. This marks a 1.8% increase compared to FY23. This achievement was made alongside continued investments in new infrastructure to ensure safe and reliable operations while advancing significant growth initiatives. It is one of the best dividend stocks on our list as the company has been rewarding shareholders with growing dividends for the past 20 years. The stock has a dividend yield of 6.67%, as of December 25.
Overall APA.AX ranks 2nd on our list of the best ASX dividend stocks heading into 2025. While we acknowledge the potential of APA.AX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than APA.AX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.