UGI Corp. (UGI) operates through AmeriGas Propane (a liquefied petroleum gas distribution business) and UGI Utilities (natural gas distribution utility), notes utility sector expert Robert Rapier, editor of Investing Daily's Utility Forecaster.
UGI owns the second-largest regulated gas utility in Pennsylvania and is the largest distributor of liquefied petroleum gas (LPG) in the U.S., France, Austria, Belgium, Norway, Denmark, and Luxembourg.
My screening criteria consider several factors. Among other things, I look at consensus analyst estimates from two independent sources. One source is the Equity Summary Score, which provides a consolidated view of the ratings from several independent research providers.
This research is primarily provided for institutional investors. UGI is presently the fourth highest-ranking utility per these criteria, out of the 90 utilities that passed my other screening criteria.
I also use the ratings by our data provider FactSet, which gathers estimates from analysts providing research primarily aimed at retail investors. FactSet rates UGI a 1.3 (on scale from 1-Strong Buy to 2-Hold to 3-Sell). That is a pretty strong buy rating, and the highest rating of any portfolio holding.
Of course, that is not the sum total of my analysis on a company, but many of the factors I look at also factor into those analyst estimates. For example, UGI’s cash flow has shown strong performance coming out of the pandemic.
The most recent quarter reported operating cash flow that was 24% higher than a year ago. Over the past 10 years, UGI’s average annual free cash flow was $253 million, the only one of its peers to generate positive cash flow over this period.
The company beat Q2 2021 revenue estimates by $110 million, and recently raised the quarterly dividend by 4.5% to $0.345 per share. This marked the 34th consecutive year that UGI Corporation has raised its dividend.
Over the past 10 years, UGI has grown its dividend at an average annual rate of 7.0% and is targeting 4% dividend growth for the future. The low payout ratio of 31% provides a good degree of confidence that the company can continue to grow its dividend for the foreseeable future.
Further, the company’s price-to-earnings (P/E) ratio is only 11, significantly below the five-year average of 20.6. UGI currently yields 3.0% and is a buy up to $52.