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Here's Why You Should Add UGI Stock to Your Portfolio Now

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UGI Corporation’s (UGI - Free Report) systematic capital expenditures, accretive acquisitions and customer additions are likely to enhance its existing operations. Also, a strong liquidity position and regular dividend payments act as tailwinds.

Let’s analyze the factors that make this currently Zacks Rank #2 (Buy) stock an ideal investment bet. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Shares of UGI have moved up 26.5% in the year to date period, outperforming the industry’s rise of 12.1%.

Year-to-Date Price Performance

Zacks Investment ResearchImage Source: Zacks Investment Research

Northward Growth Projections

The Zacks Consensus Estimate for fiscal 2022 earnings stands at $3.25 per share, indicating a 9.8% improvement from the prior fiscal year’s reported figure. The Zacks Consensus Estimate for fiscal 2022 sales stands at $8.03 billion, implying a 7.8% increase from the previous fiscal year’s reported number. The long-term (three-five years) earnings growth rate is pegged at 8%.

Prudent Strategic Moves

The acquisition of Columbia Midstream Group, LLC from TC Energy Corporation, now known as UGI Appalachia, has continuously recorded a strong performance. Also, UGI completed the purchase of Mountaineer for $540 million in September 2021.

Moreover, UGI’s buyout of GHI Energy, LLC, a renewable natural gas company operating in California, is helping it expand its renewable product offerings and support its aim of growing in an environmentally-friendly way. Moreover, in September 2021, Energy Services announced that it will partially fund a JV to develop several clusters of dairy farm digester projects for producing RNG from multiple farms in South Dakota.

It disposed its 5.97% ownership interest in the Conemaugh coal-fired generating station in fiscal 2020 to reduce the total Scope I direct emissions by more than 30%. In May 2021, it announced plans to reduce Scope I GHG Emissions by 55% within 2025.

Steady Dividend Raises

Consistent performance of UGI enabled it to reward its shareholders through annual dividend rate hikes. In May, 2021, UGI Corp.’s board of directors approved an increase in the quarterly dividend rate, taking the total to 34.5 cents per share or $1.38 on an annual basis, up 4.5% from the previous quarterly rate of 33 cents. This marks the 137th consecutive year of dividend payment and 34th straight year of annual dividend raise. Also, this hike is in line with UGI’s target to increase dividend by 4% in the long term.

Strong Financial Position

UGI exited fiscal 2021 with $2.2 billion liquidity, which is adequate to meet its current debt obligations.

Its times interest earned ratio was 7.4 for the fourth quarter of fiscal 2021, up from 5, sequentially. The ratio of more than 1 indicates that UGI will be able to meet its debt obligations in the near future without any trouble.

Solid Return on Equity (ROE)

ROE is a financial metric that helps an investor understand how efficiently a company is using its shareholders’ funds for generating returns. UGI’s ROE for the trailing 12 months is 14.86% compared with the industry’s 12.67%, thus reflecting its efficiency in utilizing its stockholders’ money.

Other Stocks to Consider

Other top-ranked stocks in the same sector include CenterPoint Energy (CNP - Free Report) , OtterTail Corporation (OTTR - Free Report) and Alliant Energy (LNT - Free Report) , all carrying the same top Zacks Rank as UGI.

CNP, OTTR and LNT delivered an earnings surprise of 13.8%, 12.5% and 6.3%, respectively, in the last reported quarter. The Zacks Consensus Estimate for 2021 earnings per share of CenterPoint Energy, Otter Tail, and Alliant Energy has moved up 0.7%, 0.8%, and 1.9%, respectively, in the past 60 days.

The long-term (three-five years) earnings growth rate for CNP, OTTR and LNT is pegged at 4.6%, 4.7% and 6.1% each. Over the past year, CNP, OTTR and LNT have returned 16.5%, 60.5% and 6.7% respectively, outperforming the sector’s 2% growth.