Energy Play UGI Offers Value, 37 Years Of Dividend Increases

Providing investors with value and with a long track record of dividend increases, energy stock UGI (UGI) is in focus and on IBD's Dividend Leaders screen.

UGI is an international distributor and marketer of energy products and services. In the U.S., the company operates AmeriGas, the country's largest propane distribution network, serving 1.2 million customers. UNG also provides gas electrical services and pipeline assets primarily in its home state of Pennsylvania.

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UNG also operates in 16 countries in Western and central Europe, providing liquefied petroleum products.

For investors seeking yield, UGI is a strong candidate with a 5.4% annualized dividend yield, well above the 1.2% average of the S&P 500. While recent dividend increases have been modest, the company has a long track record of increasing its dividend, having done so for 37 consecutive years.

Dividend Stocks' Struggles Lead To Enticing Valuations

Despite expectations of lower interest rates, many dividend stocks have struggled to gain momentum.

Excluding dividends, the S&P Dividend Aristocrat ETF (NOBL) has risen only 4% over the past year, while the broader SPDR S&P 500 Trust (SPY) is up 25%.

UGI has also faced challenges but saw a boost in late November after its Q4 earnings exceeded expectations and the company issued positive guidance for 2025.

After reporting earnings of $3.06 per share in the fiscal year that ended in September, analysts expect EPS to decline slightly to $2.91 in the current fiscal year before rebounding to $3.03.

Although UGI is not showing strong earnings growth, it offers value to investors. The stock is trading at a price-to-earnings (P/E) ratio of just 9, well below the S&P 500's P/E ratio of 27. This is also at the lower end of UGI's historical P/E range, which has fluctuated between 7 and 19.

After favorable earnings were announced on Nov. 21, shares of UGI broke out of a long term consolidation. Since then shares have reconsolidated and are forming a flat base, currently trading above both the 50- and 200-day moving averages. A 30.48 buy point can be identified by MarketSurge pattern recognition.

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