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UGI Corporation UGI completes the pricing of two million equity units, which carry an interest rate of 7.125% per annum. Underwriters will be given an option to purchase up to an additional 200,000 units within a 30-day period to cover over-allotments.
The issuance and sale of these units are planned to settle on May 25, 2021 and are subject to customary closing conditions. It will give the holder an option to convert to preference shares or equity shares after Jun 1, 2024. The company will also pay cumulative dividends at an initial rate of 0.125% per annum that will accumulate on the convertible preferred stock.
The net proceeds generated from the issue will be $191.9 million, post-adjusting for underwriting discounts, commissions and estimated offering expenses. In case, the underwriters fully exercise their option to purchase extra units, the proceeds will amount to $211.3 million. UGI Corp. intends to use the net proceeds to fund the Mountaineer Gas Company’s acquisition, and spend on related fees and expenses as well as keep some amount aside for general corporate purposes.
Solid Debt Position
As of Mar 31, 2021, the company had total debt of $6,344 million, slightly down from $6,381 million on Sep 30, 2020. The utility exited the second-quarter fiscal 2021 with $1.6-billion liquidity, which is adequate to meet its current debt obligations. Moreover, on May 4, 2021, UGI Corp. extended the maturity of its $300-million existing term loan to May 2025, which was earlier due in August 2022. Also, it added a new four-year $300-million term loan commitment to fund a portion of its above-mentioned buyout and for general corporate purposes.
Moreover, its times interest earned ratio was 4.58 for the second quarter of fiscal 2021, up from 3.50 sequentially. Improving ratio indicates that the company will be able to meet its debt obligations in the near future without any trouble. At a time when every entity is looking to preserve liquidity amid uncertainty as a result of the COVID-19 outbreak, the company’s improving current ratio is reassuring for its investors.
Strong Dividend Policy
Along with having a favorable debt position, UGI Corp.’s consistent performance enabled it to reward its shareholders through annual dividend rate hikes and share repurchases. In May, 2021, the company’s board of directors approved a raise in its quarterly dividend rate to 34.5 cents per share or $1.38 on an annual basis, reflecting a 4.5% increase from its previous quarterly payout rate of 33 cents.
Cash flow provided by operating activities was $646 million in the fiscal second quarter compared with $562 million in the comparable period of last fiscal year. The company’s current dividend yield of 3.01% is better than the Zacks S&P 500 composite’s 1.29%.
Zacks Rank & Price Performance
In the past six months, shares of this currently Zacks Rank #2 (Buy) company have rallied 21.4%, outperforming the industry's growth of 20.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks to Consider
Utilities like MGE Energy Inc. MGEE, NewJersey Resources Corporation NJR and Hawaiian Electric Industries, Inc. HE are all carrying the same Zacks Rank as UGI Corp. at present.
MGE Energy pulled off average earnings surprise of 3.83% in the last four quarters. It has a long-term (three-five years) earnings growth rate of 5.94%.
The Zacks Consensus Estimate for NewJersey Resources’ fiscal 2021 earnings has moved 16.8% north in the past 60 days. It has a long-term earnings growth rate of 7.10%.
Hawaiian Electric Industries has a long-term earnings growth rate of 7.10%. The Zacks Consensus Estimate for the company’s 2021 earnings has moved 8.8% north in the past 60 days.
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Hawaiian Electric Industries, Inc. (HE) : Free Stock Analysis Report
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