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UGI (UGI) is a Top Dividend Stock Right Now: Should You Buy?

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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

UGI in Focus

Headquartered in King Of Prussia, UGI (UGI - Free Report) is a Utilities stock that has seen a price change of -23.61% so far this year. The natural gas and electric utilities operator. Is paying out a dividend of $0.33 per share at the moment, with a dividend yield of 3.83% compared to the Utility - Gas Distribution industry's yield of 3.3% and the S&P 500's yield of 1.49%.

Looking at dividend growth, the company's current annualized dividend of $1.32 is up 0.8% from last year. Over the last 5 years, UGI has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.90%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. UGI's current payout ratio is 49%. This means it paid out 49% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, UGI expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $2.86 per share, representing a year-over-year earnings growth rate of 7.12%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, UGI is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).


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