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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
UGI in Focus
UGI (UGI) is headquartered in King Of Prussia, and is in the Utilities sector. The stock has seen a price change of 28.46% since the start of the year. The natural gas and electric utilities operator. Is currently shelling out a dividend of $0.33 per share, with a dividend yield of 2.94%. This compares to the Utility - Gas Distribution industry's yield of 2.74% and the S&P 500's yield of 1.26%.
In terms of 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 9.13%. 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. Right now, UGI's payout ratio is 49%, which means it paid out 49% of its trailing 12-month EPS as dividend.
UGI is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $2.90 per share, which represents a year-over-year growth rate of 8.61%.
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.
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. Income investors have to be mindful 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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