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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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
Headquartered in King Of Prussia, UGI (UGI) is a Utilities stock that has seen a price change of 30.81% so far this year. The natural gas and electric utilities operator. Is currently shelling out a dividend of $0.34 per share, with a dividend yield of 3.02%. This compares to the Utility - Gas Distribution industry's yield of 3.04% and the S&P 500's yield of 1.33%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.38 is up 5.3% from last year. UGI has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 9.45%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, UGI's payout ratio is 42%, which means it paid out 42% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for UGI for this fiscal year. The Zacks Consensus Estimate for 2021 is $3 per share, with earnings expected to increase 12.36% from the year ago period.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. 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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UGI Corporation (UGI) : Free Stock Analysis Report
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