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

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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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

UGI in Focus

Based in King Of Prussia, UGI (UGI - Free Report) is in the Utilities sector, and so far this year, shares have seen a price change of -0.08%. The natural gas and electric utilities operator. Is currently shelling out a dividend of $0.38 per share, with a dividend yield of 6.1%. This compares to the Utility - Gas Distribution industry's yield of 3.69% and the S&P 500's yield of 1.56%.

In terms of dividend growth, the company's current annualized dividend of $1.50 is up 2% from last year. Over the last 5 years, UGI has increased its dividend 4 times on a year-over-year basis for an average annual increase of 3.71%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. UGI's current payout ratio is 47%, meaning it paid out 47% of its trailing 12-month EPS as dividend.

UGI is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $2.92 per share, which represents a year-over-year growth rate of 2.82%.

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. However, not all companies offer 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. 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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