Yahoo Finance UGI's (NYSE:UGI) Shareholders Will Receive A Bigger Dividend Than Last Year
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 takes the dividend yield to 4.9%, which shareholders will be pleased with.
Check out our latest analysis for UGI
UGI's Earnings Easily Cover The Distributions
A big dividend yield for a few years doesn't mean much if it can't be sustained. Despite not generating a profit, UGI is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.
Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 40%, so there isn't too much pressure on the dividend.
UGI Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was $0.72, compared to the most recent full-year payment of $1.50. This implies that the company grew its distributions at a yearly rate of about 7.6% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
The Dividend's Growth Prospects Are Limited
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings have grown at around 3.6% a year for the past five years, which isn't massive but still better than seeing them shrink. 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. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would be a touch cautious of relying on this stock primarily for the dividend income.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for UGI that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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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