APA Group (ASX: APA) shares
have outperformed the S&P/ASX 200 (INDEXASX: XJO) over the last ten years by some margin and offer a trailing dividend yield of 4.3%. Could APA shares be a buy?
About APA Group
APA Group listed on the ASX in 2000 with just six employees and has gone on to become one of Australia’s leading energy infrastructure businesses.
Today, APA has 1,800 employees, 15,400km of pipelines and a 28,900km distribution network. APA is among the largest companies on the ASX with a market capitalisation of almost $13 billion.
APA Past Performance
Keeping in mind that past performance is not a reliable indicator of future performance, APA’s history would suggest it has been a very good investment over the last 10 years.
Since July 2009, APA shares have returned approximately 15.63% per year compared to 5.77% per year for the S&P/ASX 200. In total, shares are up 330% in the last decade.
Perhaps even more impressive, APA has been consistently growing its dividend since 2007 and currently offers a trailing dividend yield of 4.3% unfranked.
Competitive Advantages
While APA is in the price-taking energy business, they have a significant competitive advantage in the form of infrastructure. APA recently reported that the total assets they own or operate exceed $20 billion.
In other words, while there are other established competitors, this is not an industry that is easily disrupted by small, innovative businesses. The cost of competing with a company like APA is high because it’s nearly impossible to replicate the assets they have built over the last 19 years.
This is reflected in their growth rate, with net profit after tax (NPAT) up 27% in 1H19 and revenue up 6.1%.
Is It A Buy?
This is not an industry I typically invest in because of the fact that energy prices can vary widely year-to-year. However, APA’s growth rate and dividend track record are certainly impressive and may warrant a second look.
While APA does seem to have some competitive advantage, shares also look relatively expensive compared to the competitors such as AGL Limited (ASX: AGL).
For now, I’d prefer to invest in one of the businesses mentioned in the free report below.
[ls_content_block id=”14945″ para=”paragraphs”]
Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
