UGI Corporation’s ( UGI Quick Quote 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 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 Corp. completed the purchase of Mountaineer for $540 million in September 2021.
Moreover, UGI Corp.’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. UGI 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. Other utilities are also adopting measures to cut emissions. ONEOK, Inc. ( OKE Quick Quote OKE - Free Report) announced its plans to reduce Scope 1 and Scope 2 GHG emissions by 30% from the 2019 levels of 7.2 million metric tons. Another utility MDU Resources ( MDU Quick Quote MDU - Free Report) retired Lewis & Clark coal facilities in March 2021 and will retire Hesket I & II coal-fired stations in early 2022. Atmos Energy ( ATO Quick Quote ATO - Free Report) aims at reducing methane emissions 10-15% in five years from the current levels. UGI also looks to lower methane emissions 50% within 2035 from the 2017 levels. The long-term earnings growth rate for OKE, MDU and ATOispegged at 7.86%, 6.70% and 7.27% each. Earnings surprise delivered by OKE, MDU and ATO in the last four quarters is 2.36%, 3.47% and 6.46%, respectively, on average. 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 itsquarterly 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 Corp.’s target to increase dividend 4% in the long term. Its current dividend yield of 3.05% betters the Zacks S&P 500 composite’s 1.38%. The dividend yield for OKE, MDU and ATO is 6.39%, 3% and 2.6%, respectively. Strong Financial Position
UGI Corp. exited fiscal 2021 with $2.2 billion liquidity, 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 Corp.’s ROE for the trailing 12 months is 12.91% compared with the sector’s 9%, thus reflecting its efficiency in utilizing its stockholders’ money.
Shares of UGI have returned 21.6% in the past year, outperforming the
industry’s rise of 15%. One Year Performance Image Source: Zacks Investment Research