ASX dividend shares can be excellent choices for passive income if we choose the right sort of names.

For me, there are three things that I want to see as a dividend investor, whether I'm 30, 60, or 90 – long-term earnings/asset growth, dividend growth, and a good yield.

The last couple of years have seen the share prices of several ASX dividend shares soar, such as Commonwealth Bank of Australia (ASX: CBA), Wesfarmers Ltd (ASX: WES), and JB Hi-Fi Ltd (ASX: JBH). That strength has led to the compression of the dividend yield on offer for new investors.

I'm going to talk about two businesses whose valuations have fallen, but their outlook looks more positive, in my view.  

APA Group (ASX: APA)

With interest rates starting to edge down in Australia, this could be the right time to look at an asset-heavy business like APA, where its cash flow generation appears undervalued.

It owns a huge gas pipeline network around Australia, transporting half of the country's gas usage. The ASX dividend share also owns gas-powered energy generation, gas processing and storage facilities, solar farms, wind farms, and electricity transmission assets.

Energy is vital for Australian households and businesses, so I'd call this business' earnings quite defensive. A large majority of its revenue is linked to inflation, so its top line has largely been protected over the inflationary period of the last few years.

Yes, debt costs are higher, but that could start coming down in the next couple of years. Plus, the APA share price decline of close to 40% in the last two years has pushed up the yield on offer.

It has grown its distribution each year for the past 20 years and expects to grow its payout by another 1.8% in FY25 to 57 cents per security. It currently has an FY25 distribution yield of 8%.

Brickworks Ltd (ASX: BKW)

Brickworks is another business with impressive passive income credentials. The ASX dividend share has grown each year for the past decade, and it hasn't cut its payout by close to 50 years.

The FY24 payout was 67 cents per share, which translates into a grossed-up dividend yield of approximately 3.7%, including franking credits.

It may be best known for its market-leading brickmaking operations, but I'm most interested in its major holding of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares and its 50% stake in an industrial property trust.

Those two assets combined essentially pay for Brickworks' growing dividend while providing a strong base of earnings even when building product demand is relatively low (such as now).

Soul Patts, the diversified investment conglomerate, has grown its annual ordinary dividend for 24 years in a row, enabling Brickworks to pay its own resilient dividend. Meanwhile, the industrial property is benefiting from warehouse completions and strong demand for industrial space in cities, thanks to trends like e-commerce and data centre growth.

The Brickworks share price has fallen 17% since March 2024, making the ASX dividend share cheaper for investors.