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Why UGI (UGI) is a Great Dividend Stock Right Now

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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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

UGI (UGI - Free Report) is headquartered in King Of Prussia, and is in the Utilities sector. The stock has seen a price change of 27.83% since the start of the year. The natural gas and electric utilities operator. Is paying out a dividend of $0.34 per share at the moment, with a dividend yield of 3.09% compared to the Utility - Gas Distribution industry's yield of 2.98% and the S&P 500's yield of 1.34%.

Taking a look at the company's dividend growth, its current annualized dividend of $1.38 is up 2.2% from last year. UGI has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 9.53%. Looking ahead, future dividend growth will be dependent on earnings growth and 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 47%. This means it paid out 47% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for UGI for this fiscal year. The Zacks Consensus Estimate for 2021 is $3.28 per share, with earnings expected to increase 10.81% from the year ago period.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that UGI is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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