2 Dividend Growth Stocks That Could Outperform the ASX200
When it comes to investing, many Australian investors look for two things: consistent income and the potential for long-term growth. Dividend growth stocks are uniquely positioned to deliver both. These companies not only pay regular dividends but also increase their payouts over time, giving shareholders a growing income stream while preserving capital.
In today’s market, two names stand out for their strong financial results, market leadership, and commitment to rewarding shareholders: Telstra Group Ltd (ASX: TLS) and APA Group (ASX: APA). Both have reported solid FY25 results and are actively investing in future growth, making them candidates to outperform the broader ASX200 index.
Telstra: Connectivity Leader with Consistent Dividend Growth
For decades, Telstra has been the backbone of Australia’s telecommunications industry. While many traditional telcos around the world have struggled with slowing growth and intense competition, Telstra has reinvented itself, focusing on next-generation infrastructure and strategic partnerships.
FY25 Performance
Telstra’s latest financial results highlight this transformation. For FY25, the company reported:
- Underlying EBITDA of $8.62 billion, up 5% year-on-year
- Underlying NPAT rising 3% to $2.2 billion
- Earnings per share increasing 12% to 22.4 cents
This strong performance reflects Telstra’s operational discipline and ability to expand margins, even in a competitive environment.
Dividend Strength
For income-focused investors, dividends are a critical measure. Telstra declared a fully franked dividend of 19 cents per share, a 5.6% increase year-on-year. With a dividend yield near 4.5%, Telstra comfortably outpaces many blue-chip peers on the ASX200, while maintaining the stability that income-seeking investors value.
Growth Drivers
Telstra is not resting on its legacy infrastructure. Instead, it is future-proofing its business through:
- 5G expansion across regional and urban Australia
- Intercity fibre network development to enhance speed and reliability
- Satellite-to-mobile messaging services, extending coverage to underserved areas
- Strong performance in its Enterprise and fixed-line segments, which saw EBITDA lift 41%, offsetting softer mobile subscriber growth
The company is also exploring AI and data monetisation opportunities via new partnerships, showing its ability to diversify beyond traditional telecom revenues.
Valuation & Outlook
Telstra has also been proactive with shareholder-friendly initiatives, including announcing a $1 billion buyback program. With sustainable earnings, disciplined capital allocation, and consistent dividend increases, the outlook for Telstra appears highly supportive for both income and growth investors.
APA Group: Infrastructure Powerhouse Delivering Dividend Growth
If Telstra provides the digital infrastructure for Australia, APA Group underpins the country’s energy infrastructure. As the nation’s largest gas pipeline operator, APA has built a reputation for reliable cash flows, inflation-linked revenues, and steady dividends.
FY25 Results
APA’s financial year results reaffirm its resilience and growth trajectory. Highlights include:
- EBITDA of $1.99 billion, up 8.51% year-on-year.
- Revenue of $3.14 billion, rising 4.28% year-on-year.
- Operating cash flow above $1 billion, giving the company ample flexibility to fund growth and distributions.
Dividend Uplift
Distributions rose to 57 cents per security, up 1.8% from the prior year. Management has already guided for further growth to 58 cents per security in FY26, highlighting APA’s confidence in its earnings and ability to reward shareholders consistently.
Growth and Business Momentum
What makes APA compelling is the strength of its underlying assets and its investments in the future. The company’s revenues are underpinned by inflation-linked tariffs, providing a natural hedge against rising costs. In addition, APA is expanding its infrastructure portfolio with projects such as:
- The Atlas to Reedy Creek pipeline
- The Port Hedland solar and battery project
These initiatives position APA not just as a gas pipeline operator but as a player in Australia’s energy transition, where renewable integration will require reliable transmission and storage infrastructure.
Defensive Growth Profile
With a dividend yield around 4.5%, APA offers an “all-weather” income profile. Its infrastructure assets are difficult to replicate, and its regulatory environment provides protection against market volatility. Combined with cost management and growth capex, APA’s long-term trajectory looks solid.
Why Telstra and APA Could Outperform the ASX200
The ASX200 is dominated by financials, miners, and cyclical companies whose dividends often rise and fall with commodity prices and economic cycles. By contrast, Telstra and APA deliver defensive earnings and reliable cash flows, while still investing in growth.
Here’s why they could beat the index:
Dividend Growth: Both companies have consistently raised dividends, offering yields above the ASX200 average of ~4%.
Resilient Business Models: Telecom connectivity and energy infrastructure are essential services, meaning demand remains steady even during downturns.
Strategic Investments: Telstra’s 5G rollout and APA’s renewable infrastructure expansion are future-focused projects that position them for sustainable growth.
Risks to Watch
While both companies offer compelling investment cases, investors should remain aware of potential risks:
Telstra: Watch for changes in mobile subscriber growth, execution risks around its 5G and fibre rollout, and pressure on fixed-line margins.
APA Group: Regulatory changes, shifts in gas market pricing, and execution of its energy transition projects will be key factors to monitor.
Conclusion
Dividend growth investing is about striking a balance—finding companies that not only deliver reliable income today but also grow that income tomorrow. Telstra Group and APA Group exemplify this balance.
Both companies operate in essential industries, generate strong cash flows, and have a proven track record of increasing shareholder distributions. Their defensive yet forward-looking business models set them apart from many other ASX200 constituents.
For investors seeking a blend of income stability, resilience, and growth potential, Telstra and APA deserve close consideration. With robust FY25 results, ambitious growth plans, and yields that outpace the index average, these two dividend growth stocks could well outperform the ASX200 in 2025 and beyond.
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