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Why I Just Bought This Ultra-High-Yield Dividend Stock
I viewed utilities as boring investments for much of my life. The closer I get to retirement, though, the more I realize the truth of the statement, “Boring is beautiful.”
My portfolio now includes several utility stocks. And I recently added another: UGI Corporation (NYSE: UGI). Why did I buy shares of UGI? Three key reasons rank at the top of the list.
1. A resilient business
The last thing I want to invest in these days is a company that could go under because of a bad move or two. UGI isn’t that kind of company because its business is highly resilient.
UGI owns AmeriGas, the largest retail propane distributor in the U.S. It operates natural gas utilities serving customers in Pennsylvania, Maryland, and West Virginia.
The company’s electric utility serves customers in Pennsylvania, and its Energy Services subsidiary operates natural gas pipelines and natural gas storage facilities. UGI also owns a liquified petroleum gas (LPG) distribution unit that serves several European countries.
The company has been in business for 142 years. It expects to deliver average long-term earnings-per-share growth of between 4% and 6%.
Sure, AmeriGas’ earnings have been highly volatile. Last year, Fitch lowered its outlook on the business to negative from stable.
However, UGI is committed to stabilizing AmeriGas by controlling costs and strengthening its balance sheet. Those efforts seem to be bearing fruit, based on the company’s solid fiscal 2024 third-quarter results.
2. An impressive dividend
I’d be lying if I said UGI’s dividend wasn’t an important part of my decision to buy the stock. Its forward dividend yield is an ultra-high 5.95%. Its payout ratio also stands at a reasonable level of 47.8%.
UGI has paid a dividend for 140 consecutive years, and that’s not a typo. The utility company first paid a dividend way back in 1884 and hasn’t missed a beat since. Few dividend stocks have such a reliable track record.
Over the last 10 years, UGI has increased its dividend by a compound annual growth rate of 6%. Granted, the company won’t give shareholders a dividend hike this year and doesn’t expect to do so in fiscal 2025 or 2026, either, as it focuses on strengthening its balance sheet. However, UGI plans to return to increasing its dividend payout by roughly 4% per year in fiscal 2027 and beyond.
3. An attractive valuation
UGI’s share price has trended mainly downward over the last three years. Its AmeriGas challenges served as a primary culprit behind this disappointing performance. However, there’s a positive side effect of the stock’s decline — an attractive valuation.
Zacks Equity Research gives UGI a grade of “A” on valuation, and the stock trades at only 8x forward earnings. That’s less than half the average forward price-to-earnings ratio of 18.8 for the S&P 500 utilities sector.
I might view UGI as a value trap if I didn’t think its future looked brighter than its recent past, but that’s not the case as the company’s financials are improving. It expects to deliver reliable earnings growth going forward.
Plus one bonus
Some investors like to “bet on the jockey and not the horse.” My take is that if the horse is fast enough, it doesn’t matter much who the jockey is. That said, I want solid, capable management in charge of the companies in which I invest.
It was a nice bonus, therefore, when UGI named Bob Flexon as its new CEO, effective Nov. 1, 2024. Flexon served as UGI’s CFO for roughly six months in 2011 and was CEO of power company Dynegy from July 2011 to April 2018. He’s also been CEO of engineering and construction contractor Foster Wheeler and CFO and COO of NRG Energy.
I didn’t load up on UGI stock because Flexon is taking the helm of the company, but he exemplifies the kind of leadership I like to see. With Flexon as CEO, I expect UGI will deliver the steadiness that investors want.
Should you invest $1,000 in UGI right now?
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Keith Speights has positions in UGI. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Why I Just Bought This Ultra-High-Yield Dividend Stock was originally published by The Motley Fool
The habits of millionaires are a topic of interest when it comes to financial advice. After all, unless they received a large chunk of money as an inheritance or gift, most millionaires had to be smart with their money to get where they are.
Learning how millionaires accumulate wealth — and where they keep it — can provide valuable insights for anyone focused on growing their money. One common question is whether or not millionaires keep money in checking accounts.
Studies show that in recent years, millionaires are keeping a significant portion of their wealth in cash. According to CNBC’s , that portion was about 24% in 2023. While this doesn’t necessarily mean a quarter of a millionaire’s wealth is sitting in a checking account, it does indicate the importance of maintaining liquid assets. And a checking account can be a helpful tool for doing so — whether or not you’re a millionaire.
Anyone, regardless of net worth, can find value in a checking account. Checking accounts allow unlimited deposits and withdrawals, check writing, bill pay, and other features to help you manage your money day-to-day.
While millionaires may keep large portions of their wealth in other deposit accounts and investments, some may use a checking account to manage daily spending. Millionaires also recognize the importance of having liquid assets, like funds in checking and savings accounts. Accessible cash lets you cover unexpected expenses without needing to sell off investments, borrow money, or pay a penalty for tapping your retirement savings early.
The amount of money a millionaire keeps in their checking account is highly personal and depends on preference. However, because checking accounts rarely earn competitive — if any — interest, some millionaires intentionally limit their checking account balance. Some may choose to keep the bare minimum, such as a couple of months’ worth of essential expenses, in their checking accounts, keeping the rest of their wealth in more lucrative assets.
Regardless of preference, it would be surprising for a millionaire to keep more than $250,000 in a single checking account. That’s because the Federal Deposit Insurance Corp. (FDIC) only insures up to $250,000 in deposits per institution, per account holder.
While millionaires may use checking accounts for day-to-day financial transactions, they may also use some of the following accounts in addition to, or in place of, a checking account:
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Savings accounts: Like checking accounts, savings accounts provide a high degree of liquidity, allowing you to access your money as needed for regular or unexpected expenses. High-yield savings accounts, in particular, give millionaires an extra bang for their buck. Some of the best accounts currently offer rates upwards of 4% versus the national average savings account rate of 0.46%.
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Cash management accounts: Cash management accounts (CMAs) pay competitive interest rates while maintaining more accessibility than a savings account. Some CMAs come with a debit card and ATM access, and many provide extended FDIC coverage limits by “sweeping” additional deposits into partner banks. CMAs are available at brokerages, not banks, facilitating easy transfers between investment and cash accounts.
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Money market accounts: Similar to CMAs, money market accounts combine features of checking and savings accounts, often paying competitive interest rates and providing check writing and ATM access. Banks and credit unions offer these accounts, which are federally insured. Minimum opening deposit and minimum balance requirements are often higher than those for standard savings accounts.
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Retirement and tax-advantaged accounts: Millionaires understand the importance of investing for their later years, and retirement accounts such as 401(k)s and IRAs allow them to do so in a tax-advantaged way. Some retirement accounts, like 401(k)s, are offered by certain employers. Others, such as traditional and Roth IRAs, are available to anyone.
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Brokerage accounts: The IRS limits contributions to tax-advantaged accounts, and millionaires typically invest beyond these limits. They do so with taxable brokerage accounts, which can hold investments such as stocks, bonds, and mutual funds without contribution limits.
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Other investments, like real estate, commodities, and art: Some millionaires may decide to diversify their portfolio with other investment types. These could include real estate investments, such as investment properties or real estate investment trusts (REITs); commodities, such as metals or energy products; art; and more.
The amount of money millionaires keep in their checking accounts depends on personal preference. While some millionaires may keep six figures in their checking account to maintain a comfortable cash cushion, others may choose to keep the bare minimum in checking. You wouldn’t expect millionaires to keep more than $250,000 in a checking account, however, because balances over this threshold aren’t typically insured.
There’s no single bank that’s a favorite among millionaires; it’s another matter of preference. However, millionaires are likely to bank with institutions that offer private banking to those who meet specific financial requirements. Private banking may include wealth planning services, waived fees, dedicated bankers, and additional perks. J.P. Morgan Private Bank, Citi Private Bank, and Bank of America Private Bank are among some of the most popular banks for millionaires.
Billionaires may have checking accounts, but they likely use accounts that cater to ultra-high-net-worth individuals. These accounts may come with perks such as a dedicated banker, waived fees, and competitive interest rates. Alternatively, billionaires may opt for a cash management account with higher FDIC insurance coverage limits and checking account features.
No rule says you can’t have a million dollars in a checking account, but FDIC insurance typically only covers up to $250,000. Plus, you can get a bigger return on your investment by keeping $1 million elsewhere. One alternative is a cash management account, which acts like a checking account but generally earns higher interest. Plus, many cash management accounts insure more than the standard $250,000 by sweeping funds into multiple partner banks.
Lumen Technologies, Inc. (NYSE:LUMN) shares are trading higher on Monday after the company announced it is partnering with Meta Platforms, Inc. (NASDAQ:META) to significantly increase Meta’s network capacity and help drive its AI ambitions.
Lumen’s partnership offers Meta enhanced flexibility with secure, on-demand bandwidth, supporting its complex computing requirements and enabling it to serve billions daily.
Ashley Haynes-Gaspar, Lumen’s EVP and chief revenue officer, said, “We’ve transformed our company to meet this demand. As Meta’s customers use more AI services across its platforms, we’re helping provide Meta with a seamless, effortless, and flexible network that will meet its growing needs.”
Lumen Technologies said its Private Connectivity Fabric enables long-term network capacity for Meta’s AI.
Alex-Handrah Aimé, director of Meta’s Network Investments stated, “Our AI tools are performing increasingly more complex tasks including enabling conversations in a variety of languages and translating text to images in real time, while helping people interact with the world around them in new, immersive ways.”
Lumen will report third quarter 2024 results on November 5, 2024.
Investors can gain exposure to the stock via Invesco S&P SmallCap Utilities & Communication Services ETF (NASDAQ:PSCU) and First Trust Cloud Computing ETF (NASDAQ:SKYY).
Price Action: LUMN shares are up 9.50% at $7.38 at the last check Monday.
Image via Shutterstock
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This article Lumen And Meta Join Forces To Boost AI With Flexible, On-Demand Network Solutions originally appeared on Benzinga.com
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
CoinShares said the United States and Bitcoin led crypto investment product dynamics last week amid growing optimism over a potential Republican election win in the US.
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