We recently compiled a list of the 10 Dividend Zombies and Kings with Longest Dividend Payouts. In this article, we are going to take a look at where UGI Corporation (NYSE:UGI) stands against the other dividend stocks.
Last year, artificial intelligence (AI) was the main focus in the markets, driving tech stocks to the forefront. These stocks rose by nearly 56%, accounting for the majority of the market’s gains. However, these trends quickly lose popularity once they emerge. Experienced long-term investors understand a crucial principle: while chasing short-term investment trends can often lead to disappointment, committing to a long-term strategy can yield success. As AI-related companies drove the market upward, the valuations of high dividend-paying companies quietly declined in comparison. It is not about attractive valuations of dividend stocks, these stocks also offer diversification benefits and the potential for a growing income stream, especially if the Fed decides to lower interest rates, making them a strong investment option. These stocks become more attractive when companies have a solid history of consistently paying and increasing their payouts. Read our list of Best Dividend Kings to Buy for Safe Dividend Growth.
Dividend zombies are companies that have paid dividends to shareholders for at least 100 consecutive years whereas dividend kings are companies boasting 50 years of dividend growth. Dividend growers have shown strong performance over the years, often surpassing the overall market returns. The Dividend Aristocrats index, which tracks the performance of companies with 25 consecutive years or more, has outperformed the broader market since its inception in 2005, with lower levels of volatility. Historically, the index has captured 90% of the market’s upward movements while experiencing only 82% of its declines. Currently, the Aristocrats are trading at a price-to-earnings multiple that is more than 10% lower than that of the broader market. This discount level has historically preceded prolonged periods of superior performance by the Aristocrats.
Since the end of 1989, there have been six calendar years where the broader market experienced negative performance. In each of these years, the Dividend Aristocrat index surpassed the performance of the broader equity benchmark by an average of 13.28%. Remarkably, the aristocrats delivered positive total returns in three of those years.
Given investors’ preference for dividend stocks, companies listed in the broader market indices are consistently increasing and sustaining their dividend payments. In the first quarter of 2024, the S&P’s main index distributed $151.6 billion in dividends, compared to $146.8 billion in Q1 2023. There were 796 reported dividend increases in the first quarter, totaling $22.7 billion, up from $19.7 billion in the prior-year period.
The impressive returns of dividend growers clearly demonstrate their strong performance. In this article, we will take a look at dividend zombies and dividend kings to invest in.
Our Methodology:
For this list, we selected companies that have paid dividends for over 100 years and also have strong dividend growth histories. Some of these companies are dividend kings, which means that they have raised their payouts for 50 years or more. We also considered the hedge fund sentiment around each stock, according to Insider Monkey’s database for Q1 2024. The stocks are ranked in ascending order of the consecutive years of dividend payments. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A view of the skyline from an electricity pylon, to show the ubiquity of the companies energy products.
UGI Corporation (NYSE:UGI)
Consecutive Years of Dividend Payments: 140
Another utility company that made it to our list of the best dividend zombies is UGI Corporation (NYSE:UGI). The natural gas and electric utility company delivers reliable, safe, and affordable energy to its consumers. It currently pays a quarterly dividend of $0.375 per share and carries an impressive dividend yield of 6.56%, as of June 20. The company has maintained an unbroken record of dividend payments for 140 years and has consistently increased its payouts for the past 37 years in a row.
In fiscal Q2 2024, UGI Corporation (NYSE:UGI)’s natural gas division achieved its highest second-quarter earnings, showing a 32% increase from the same period last year. In addition, significant progress was made in cost control efforts to enhance operational efficiency across the business. These outcomes highlight the resilience of its portfolio to provide long-term value to shareholders. For FY24, the company expects to achieve results that align with its adjusted EPS guidance range. It expects its EPS to be between $2.70 and $3.002 per share.
First Pacific Advisors mentioned UGI Corporation (NYSE:UGI) in its Q1 2024 investor letter. Here is what the firm has to say:
“UGI Corporation (NYSE:UGI) owns gas utilities and pipelines in Pennsylvania and West Virginia and the largest propane distribution businesses in the United States and Europe. Despite its disparate parts, UGI has increased consolidated earnings at a relatively steady high- single-digit rate while distributing excess cash through dividends. UGI’s share price has declined because of a combination of poor execution and too much debt at AmeriGas, UGI’s U.S. propane business. On August 30, 2023 UGI announced a review of strategic alternatives. We believe the company’s stock price is attractive at less than 10x earnings, and we have been incrementally adding to the Fund’s position.”
At the end of March 2024, 29 hedge funds in Insider Monkey’s database owned stakes in UGI Corporation (NYSE:UGI), down from 33 a quarter earlier. These stakes have a total value of nearly $180 million. Citadel Investment Group was one of the company’s leading stakeholders in Q1. The hedge fund also presented a bullish stance on the company, increasing its UGI position by 154% during the quarter.
Overall UGI ranks 4th on our list of the dividend zombies and kings with longest dividend payouts. You can visit 10 Dividend Zombies and Kings with Longest Dividend Payouts to see the other dividend stocks that are on hedge funds’ radar. While we acknowledge the potential of UGI as an investment, our conviction lies in the belief that deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is as promising as UGI but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
Disclosure: None. This article is originally published at Insider Monkey.