Yahoo Finance UGI (NYSE:UGI) Is Increasing Its Dividend To $0.375
The board of UGI Corporation (NYSE:UGI) has announced that it will be paying its dividend of $0.375 on the 1st of July, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 5.3%, providing a nice boost to shareholder returns.
View our latest analysis for UGI
UGI's Dividend Is Well Covered By Earnings
A big dividend yield for a few years doesn't mean much if it can't be sustained. Even in the absence of profits, UGI is paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.
According to analysts, EPS should be several times higher next year. If the dividend extends its recent trend, estimates say the dividend could reach 45%, which we would be comfortable to see continuing.
UGI Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2013, the dividend has gone from $0.72 total annually to $1.50. This works out to be a compound annual growth rate (CAGR) of approximately 7.6% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
UGI May Find It Hard To Grow The Dividend
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, UGI has only grown its earnings per share at 3.6% per annum over the past five years. Earnings growth isn't particularly strong, and if the company isn't able to become profitable fairly soon, the dividend could come under pressure.
The Dividend Could Prove To Be Unreliable
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would be a touch cautious of relying on this stock primarily for the dividend income.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for UGI that you should be aware of before investing. Is UGI not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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