UGI (US:UGI) The Motley Fool·2024-10-19 08:52Core Viewpoint - UGI Corporation is viewed as a resilient investment opportunity due to its stable business model, impressive dividend yield, and attractive valuation, despite recent challenges faced by its AmeriGas segment [1]. Group 1: Resilient Business - UGI operates a diversified utility business, including AmeriGas, the largest retail propane distributor in the U.S., and natural gas utilities in Pennsylvania, Maryland, and West Virginia [2]. - The company has a long history of 142 years and anticipates long-term earnings-per-share growth of 4% to 6% [2]. - UGI is actively working to stabilize AmeriGas by controlling costs and improving its balance sheet, which is reflected in its solid fiscal 2024 third-quarter results [3]. Group 2: Impressive Dividend - UGI offers a forward dividend yield of 5.95% with a payout ratio of 47.8%, showcasing its commitment to returning value to shareholders [4]. - The company has maintained a consistent dividend payment for 140 consecutive years, with a compound annual growth rate of 6% over the last decade [4]. - Although UGI does not plan to increase its dividend in fiscal 2025 or 2026, it aims to resume a 4% annual increase starting in fiscal 2027 [4]. Group 3: Attractive Valuation - UGI's share price has declined over the past three years, primarily due to challenges with AmeriGas, leading to an attractive valuation [5]. - The stock is currently trading at 8 times forward earnings, significantly lower than the S&P 500 utilities sector average of 18.8 [5]. - Zacks Equity Research rates UGI with an "A" for valuation, indicating strong potential for future earnings growth [5]. Group 4: Management Leadership - UGI appointed Bob Flexon as its new CEO, effective November 1, 2024, bringing valuable experience from previous leadership roles [6]. - Flexon's background includes serving as CEO of Dynegy and CFO of UGI, which is expected to enhance the company's stability and performance [6].