A 3.9% Dividend from a Business the Market Wrote Off for Two Years
UGI has paid a dividend for 142 consecutive years, but it hasn't raised it in three years. All along, the market was asking the wrong question, and when a buyer willing to pay $42.50 per share appeared in the summer, the price still stayed far below that. Why?
Key points
The company has paid a dividend for the 142nd consecutive year, but over the past three years it hasn't raised it once.
In August a buyer emerged with an offer of $42.50 per share, yet the price remained 11% below that.
A $195 million write-down and a sentence that vanished from a press release revealed more than the results themselves.
One half of the company made headlines for years, the other quietly paid the dividend bills.
On the call, the CFO promised something that hasn't happened during his entire tenure at the company.
The company everyone in Pennsylvania knows and no one in Europe has heard of
UGI Corporation $UGI is the kind of company a European investor wouldn't buy for a portfolio because they have never heard of it. Yet under one roof it has two businesses that an ordinary investor in an ideal world would wish to separate. The first is regulated gas distribution for roughly 694,000 customers in Pennsylvania - essentially a toll road where the regulator sets the toll so that the operator earns a reasonable return on what it invests in the pipe. The second is delivering propane by truck to homes across the United States (AmeriGas) and in Europe, including France and Scandinavia.
At a price around $36.6, UGI pays $1.50 per share annually, a dividend yield of 3.9%, and trades at less than 12 times earnings. That's how you value companies the market expects to stagnate, not regulated energy distributors at a time when big money is swirling around gas for data centers.
The catch is that the company has paid this dividend for the 142nd consecutive year. And yet the market lumped it together with the problem propane business for two years, until a buyer appeared in August offering significantly more for the whole company than it costs today.