Best ASX Stocks to Beat Inflation: Two Hard-to-Beat Choices

If you’re looking for practical ways to keep your portfolio ahead of inflation, it’s worth looking past flashy headlines and focusing on companies that can actually grow their cash flows and payouts year after year. Two ASX stocks that consistently show up in this conversation are Transurban Group (TCL)—the toll road operator—and Woolworths Group (WOW)—Australia’s grocery giant. Both have put up strong numbers in the face of rising prices, with business models built for the long haul. Here’s why these two stand out as top picks for inflation-conscious investors.

Transurban Group (ASX: TCL): Cash Flows With Traffic

Imagine a company that collects money every time a car, truck, or bus drives through a major Australian or North American city. That’s Transurban. Their business is simple: operate, expand, and collect tolls on some of the busiest urban expressways. What makes this model so attractive when prices are rising?

Resilience Built on Pricing Power

Transurban’s FY25 results showed real resilience. The company delivered a final distribution of 65 cents per stapled security, up 4.8% on the prior year—a solid increase that outpaces most bank accounts and fixed-rate investments. Their average daily traffic grew by 2.2% across all markets, and proportional toll revenue jumped 5.6% to $3.73 billion, reflecting both growing cities and regular toll hikes linked to inflation. Operational costs were kept flat, while margins actually improved, climbing to 75.1%.

The real edge? Contractual toll increases. Many of Transurban’s contracts allow for direct pass-through of inflation, meaning that as consumer prices rise, so do tolls—helping to protect both their revenue and margins.

Reliable Distributions, Growing Payouts

For income-focused investors, Transurban’s distributions are the main draw. Free cash per security for FY25 came in at 85.6 cents—covering the dividend comfortably and leaving plenty of flexibility for future growth. Management expects a further 6% increase in the payout next year, guiding to a distribution of 69 cents per security for FY26. At current share prices, that implies a yield north of 4.5%, which is above its five-year average and attractive in an environment where inflation is eroding savings returns.

Where Growth Comes From

Transurban isn’t just relying on organic growth. The company is actively expanding—building new roads and investing in digital upgrades like license plate recognition and flexible tolling. As cities grow and congestion worsens, demand for their roads only increases. North America, in particular, has been a standout, with traffic up 6.4% and revenue up about 20% year-on-year.

Risks to Keep in Mind

Transurban is not risk-free. Higher interest rates can increase financing costs, and regulatory changes—like potential toll caps in New South Wales—could impact future growth. But with strong cash flows, inflation-linked contracts, and a focus on operational efficiency, the company is well-placed to weather most economic conditions.

Woolworths Group (ASX: WOW): The Everyday Inflation Hedge

When inflation bites, one thing is certain: people still need to eat. Woolworths dominates Australia’s supermarket sector, with a network of stores, liquor outlets, and a rapidly growing online business. Their model is built on selling the things everyone needs, every day.

Pricing Power and Recurring Revenue

The company’s business is straightforward—sell groceries, household essentials, and alcohol. These are not luxuries; they are everyday necessities. This means revenue is both recurring and defensive. When prices rise, Woolworths can—and does—adjust shelf prices to reflect higher costs, helping to protect margins even as input prices climb.

Navigating Cost Pressures

FY25 was a tougher year for Woolworths, with cost inflation squeezing profitability. Despite this, the company remained profitable and continued to generate strong cash flow. Their focus has shifted to cost efficiency—driving savings through supply chain improvements, automation, and expansion of private-label products, which typically offer better margins than branded goods. The company is also investing heavily in online sales, which now make up a meaningful share of the total business.

Distributions Reflect Discipline

Woolworths cut its full-year dividend by 21% for FY25, with the final payout set at 45 cents per share (ex-dividend 2 September, payment 26 September 2025), bringing the total dividend for the year to 84 cents. While that’s a reduction, it remains a clear signal of commitment to shareholder returns. The dividend yield currently sits around 2.9%, modest but still attractive in the context of a defensive business and the expectation that payouts will track earnings as the company returns to growth.

Long-Term Value in Real Assets

Like Transurban, Woolworths owns a portfolio of real assets—stores, distribution centres, and a growing online platform. These assets tend to hold their value and can even appreciate as prices rise, giving investors an extra layer of protection against inflation.

Potential Downsides

Woolworths faces regulatory scrutiny, especially around grocery pricing, and is exposed to potential government intervention. Labour costs, supplier squeezes, and competition from rivals are ongoing challenges. Still, the company’s scale, brand, and focus on cost control position it well to maintain profitability through tough times.

Why These Stocks Outpace Inflation

Recurring Revenue and Pricing Power

Both Transurban and Woolworths generate revenue from services and goods that are essential—whether it’s paying a toll or buying groceries. This means demand is stable, and both companies have the ability to adjust prices in response to inflation. These are not discretionary businesses; people use them no matter the economic weather.

Real Asset Ownership

Transurban’s expressways and Woolworths’ store networks are long-lived, tangible assets that tend to become more valuable when inflation picks up. Owning these kinds of companies means you’re investing in real things, not just financial engineering.

Distribution Discipline

Despite inflationary pressures, both companies have maintained or even grown shareholder payouts. Transurban’s yields are particularly attractive, while Woolworths’ dividend, though reduced, remains reliable and is expected to recover as earnings improve.

Risks to Monitor

Interest rates: Both companies carry significant debt, so rising rates can increase their borrowing costs.

Regulation: For Transurban, government decisions on tolls are crucial. For Woolworths, ongoing scrutiny over supermarket pricing could bring further challenges.

Macroeconomic swings: If inflation cools, the benefit of these companies’ pricing power may diminish, but the defensive nature of their cash flows should still hold.

Final Thoughts Investors looking to keep pace with inflation need companies that can pass on higher costs, grow their distributions, and own tangible assets that appreciate over time. Transurban Group and Woolworths Group fit this bill. One moves people, the other moves food—both are built for the long run, and both have demonstrated the ability to deliver when prices are rising. If you’re looking for inflation-beating stocks on the ASX, these two

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