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UGI Corporation: A Strong Dividend Grower Positioned For The Future

May 04, 2020 12:31 PM ETUGI Corporation (UGI)18 Comments


  • UGI operates in four business segments associated with natural gas and liquid petroleum gas (e.g. propane).
  • Warmer winters, such as the one we just had, can meaningfully reduce revenue and earnings, but the company is working on expanding its contractual fee-based operating profit.
  • The dividend has grown each year for the past 33 years, and the company has been paying steady dividends for 135 years.
  • UGI's dividend yield, at 4.5%, is as high as it has been in 17 years.
  • Natural gas, unlike coal and oil, can look forward to many more decades of strong demand, assuming the weather mostly cooperates.

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Investment Thesis

UGI Corporation (NYSE:UGI) operates several businesses associated with natural gas and liquid petroleum gas ("LPG") in the United States and internationally. The company boasts an incredibly long history of rewarding shareholders via dividends, having paid them for 135 consecutive years and raised them each of the last 33 years.

In 2019, UGI completed two major acquisitions: AmeriGas in the propane business, and Columbia Midstream in the pipeline & storage business. These acquisitions are important to maintain UGI's long-term growth trajectory, as low commodity prices make it extraordinarily difficult to compete with peers based on price.

Despite a warm winter in 2019, weaker demand during COVID-19, and a relatively large debt load, UGI offers an attractive 4.5% dividend yield and seems poised to benefit from the long-term shift toward cleaner energy sources. After the recent selloff, shares look attractive for dividend growth investors.

The Company

UGI has four business segments. After its needle-moving acquisition of AmeriGas in 2019, Domestic LPG Distribution is the largest segment by profits. This segment sells propane to residential and commercial customers in all 50 states via 1,900 selling locations. It is the largest retail propane marketer in the US, distributing over 1.1 billion gallons of propane in 2019. UGI International distributes and markets LPG in 17 countries across Europe and is generally the market leader in these countries.

Natural Gas & Electric provides regulated gas utilities to a little under 650,000 customers across Pennsylvania (and one Maryland county). Finally, the Midstream & Marketing segment operates a portfolio of gathering, pipeline, and storage assets in the northeastern and Mid-Atlantic regions of the US.

Source: Fiscal Q1 2020 Presentation


This article was written by

Austin Rogers profile picture
Become a “Passive Landlord” with our 8% Yielding Real Estate Portfolio.

I write about high-quality dividend growth stocks with the goal of generating the safest, largest, and fastest growing passive income stream possible. My style might be called "Quality at a Reasonable Price" (QARP) in service to the larger strategy of low-risk, low-maintenance, low-turnover dividend growth investing. Since my ideal holding period is "lifelong," my focus is on portfolio income growth rather than total returns.

My background and previous work experience is in commercial real estate, which is why I tend to heavily focus on real estate investment trusts ("REITs"). Currently, I write for the investing group, High Yield Landlord.

Analyst’s Disclosure: I am/we are long UGI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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