As I approached my retirement years, my investment perspective shifted, embracing the notion that 'boring is beautiful.' This realization led to an increased interest in utility stocks, culminating in my recent purchase of UGI Corporation (UGI). Here are the three compelling reasons that convinced me to add UGI to my portfolio.

First and foremost, UGI's resilient business model stands out. I'm wary of investing in companies susceptible to failure due to poor decisions. UGI, however, operates a robust and diverse portfolio, making it unlikely to falter. The company owns AmeriGas, the top retail propane distributor in the U.S., and operates natural gas utilities across several states. Additionally, their Energy Services subsidiary and LPG distribution unit serve both the U.S. and European markets. With over 142 years in operation and a projected long-term earnings growth of 4% to 6%, UGI exemplifies stability.

Despite AmeriGas' past volatility and Fitch's downgrade, UGI’s strategic cost management and financial discipline are yielding positive results, as seen in their strong fiscal 2024 third-quarter outcomes. Secondly, the company boasts an impressive dividend record, a crucial factor in my investment decision. UGI offers a forward dividend yield of 5.95%, backed by a reasonable payout ratio of 47.8%.

For 140 years, since 1884, the company has reliably paid dividends, a rarity among dividend stocks. Even though dividend increases might pause short-term to strengthen its financial footing, UGI plans to resume dividend hikes by approximately 4% annually starting fiscal 2027. Finally, UGI’s current stock valuation presents an attractive opportunity. The company's share price has declined over the last three years, primarily due to AmeriGas-related issues.

However, this decline has resulted in a favorable valuation with UGI trading at just 8 times forward earnings, significantly lower than the S&P 500 utilities sector average of 18.8. Despite the past challenges, UGI's improving financials and bright future make it a worthy investment, avoiding the trap of a value mirage. As a bonus, UGI's recent appointment of Bob Flexon as CEO provides added confidence.

Having previously served as UGI's CFO and CEO of Dynegy, Flexon brings a wealth of relevant experience to his new role starting November 2024. His leadership style aligns with my preference for strong management, even though his appointment was not the primary reason for my investment. With Flexon at the helm, I anticipate UGI will continue to offer the stability that investors, like myself, value.