What do income investors want from a given stock? The obvious answer is, of course, income.
However, that’s not all that income investors want from their investments. They prefer not to overpay for a stock, so valuation is important. And like any other investors, income investors would love for the stocks they buy to appreciate.
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Solid income, attractive valuation, and strong share-price growth aren’t always easy attributes to find in one stock. But that doesn’t mean such stocks can’t be found. UGI Corporation (NYSE: UGI) is an ultra-high-yield dividend stock that’s dirt cheap — and Wall Street thinks it will soar 32% over the next 12 months.
UGI is a utility company focusing on natural gas transmission and distribution, electricity generation and distribution, propane distribution, and other energy services. Its roots go back to 1882 when what was then United Gas Improvement Company became the first public utility holding company in the U.S.
Like many utility stocks, UGI offers a juicy dividend. Its forward dividend yield currently stands at 6.42%. The company has paid dividends for 139 consecutive years and has increased it for 36 consecutive years.
UGI is valued attractively by almost any metric. The stock trades at only 7.4 times forward earnings, according to LSEG. Its price-to-sales ratio is a low 0.68, and its price-to-book ratio is also low at 1.07.
Granted, any valuation metric should be weighed against those of similar companies, but UGI stacks up well against other utility stocks. The average forward price-to-earnings ratio for utilities in the S&P 500 is nearly 18.4, nearly 1.5 times higher than UGI’s forward earnings multiple.
UGI’s share price has fallen roughly 5% year to date as many other utility stocks have soared. The Utilities Select SPDR ETF, which is a good proxy for the utilities sector, has risen nearly 22% in 2024.
Despite UGI’s underperformance, Wall Street hasn’t thrown in the towel on the stock. The average 12-month price target of analysts surveyed by LSEG reflects an upside potential of 32%.
Does such a lofty price target mean Wall Street analysts are uniformly bullish about UGI? No. Actually, only one of the five analysts surveyed by LSEG in November rated the stock as a strong buy. Three analysts recommended holding UGI, while one analyst viewed the stock as an underperform.