APA Group (ASX: APA) just reported its FY21 result showing a further increase to its distribution. Is it the best ASX 200 (ASX: XJO) dividend share?
APA’s FY21 result
The gas infrastructure business revealed that its revenue edged 0.7% higher to $2.14 billion in FY21.
However, underlying EBITDA (EBITDA explained) fell 1.3% to $1.63 billion. The decline was due to increased investment in strategic development opportunities and capabilities, higher insurance & compliance costs and softer contract renewals in challenging market conditions. There were also “softer” contract renewals in challenging market conditions.
APA’s reported profit after tax was $3.7 million. This was impacted by the $249.3 million non-cash Orbost impairment charge and $148 million in finance costs associated with bond note redemptions. The business has already told the market about these.
Underlying profit after tax, excluding those items, was $281.8 million. Free cashflow was down 5.7% to $901.9 million, primarily due to a non-recurring benefit in FY20.
Distribution guidance and increase
The final distribution is 27 cents per security from the ASX 200 dividend share, bringing total FY21 distributions to 51 cents per security after including the half-year distribution, up 2%.
But APA is expecting more growth in FY22. It’s expecting to pay a distribution of 53 cents per security, an increase of 3.9%.
Growth and investments
APA says that it has an ambition of net zero operations by 2050. It wants to be world class in energy solutions.
APA CEO and Managing Director Rob Wheals said: “Through our Pathfinder Program we have continued our investments in the energy solutions of tomorrow which have the potential to unlock the economic benefits from repurposing our infrastructure assets while ensuring we can continue to respond to the changing energy needs of our customers.
“APA has invested over $280 million in growth projects in FY21 which will support revenue expansion in future years. In the long-term, APA’s earnings will be supported by our pipeline of projects totaling over $1.3 billion in the next three years and reinforcing our position as Australia’s leading energy infrastructure company.
“APA has an extensive growth program, potential US strategic options and our Pathfinder program exploring the longer-term opportunities as we transition to a zero carbon energy outlook.”
Is APA the best ASX 200 dividend share?
APA is not too far from having increased its distribution for two decades in a row. The prospect of a higher distribution in FY22 is attractive. At the latest APA share price, that suggests a 5.3% yield.
The infrastructure business has some tough competition for being the best ASX 200 dividend share with companies like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Brickworks Limited (ASX: BKW) and Charter Hall Long WALE REIT (ASX: CLW).
In terms of offering yield, income reliability and expansion into renewable energy infrastructure, I think APA could be one of the very best ASX 200 dividend shares around.
