Income investors can be a nervous bunch. After all, if you’re living off the income generated by your portfolio, then it’s hard to shrug off a mistake that could reduce your quality of life.

That’s why income investors are understandably fixated on the concept of Dividend Aristocrats. These are companies that have increased their dividend every year for at least 25 years. There are even Dividend Kings—companies that have increased their dividend every year for at least 50 years.

To us, the dividend is sacrosanct. And it’s heartening that there are still companies that understand the covenant they have with shareholders—and have upheld it decade after decade with little credit from Wall Street.

Unfortunately, there’s a lot more to picking the right dividend stock than simply looking to see whether it has a long-term record of rising payouts, though, of course, that is an important consideration.

In the latest issue of Investing Daily’s Utility Forecaster, we highlighted the 18 companies in our coverage universe that have been boosting their payouts every year for at least 20 years. This cohort includes two official Dividend Aristocrats and five Dividend Kings.

Then we broadened our search to every stock in our coverage universe that has increased their dividend every year for at least 10 years and found another 21 stocks.

We then examined this universe of 39 super dividend payers by applying our stringent criteria to find the best of the best: the 11 fundamentally superior utilities with at least 10 consecutive years of annual dividend growth.

As proof that it’s not enough simply to be a Dividend Aristocrat or Dividend King, only one of the seven stocks in our coverage universe that are bona fide dividend royalty made the final cut. In fact, this company has had an astounding 57 consecutive years of annual dividend growth, a truly exemplary record. And we profile it in detail in the latest issue.

The other 10 utilities that made the cut are what we refer to as Dividend Arrivistes—companies with strong earnings and dividend growth, manageable debt, and the possibility of becoming future Dividend Aristocrats.

So for this week’s edition of Income Without Borders, let’s take a look at one of these 10 fundamentally superior long-term dividend growers.

Hiding in Plain Sight

Pennsylvania-based UGI Corp. (NYSE: UGI) has raised its dividend for 30 consecutive years. That makes it a Dividend Aristocrat in our book, but the $8.4 billion natural gas and propane distributor hasn’t garnered official recognition from Wall Street because it’s not part of the S&P 500.  

Meanwhile, yield chasers are likely better acquainted with UGI’s master limited partnership (MLP) subsidiary, AmeriGas Partners LP (NYSE: APU), whose units currently yield 8.3%.

Although UGI has been steadily growing its dividend for 30 years now, its forward yield is a more conservative 2.1%.

Nevertheless, we believe income investors are best served by allocating a majority of their portfolios to stocks that yield between 2% and 5%. In general, high yields don’t come without higher risk. And it’s important to ensure that your portfolio has proper ballast to weather any situation, from market downturns to sector crashes.

Certainly, a company that has grown its payout for 30 consecutive years is exactly the kind of conservative operator that should do a good job of holding its value regardless of what’s happening in the market.

UGI’s business profile offers a mix of regulated and unregulated segments.

In the regulated arena, the firm’s utilities division owns two natural gas distributors that serve more than 626,000 customers in eastern and central Pennsylvania and an electricity distribution company that serves 62,000 customers in northeastern Pennsylvania. This segment contributed 22.1% of operating profits last year.

UGI’s midstream segment includes 200 miles of pipeline systems situated in the prolific Marcellus shale formation, along with 15 billion cubic feet of natural gas storage and 1.35 billion cubic feet of liquefaction capacity. This segment contributed 16.1% of operating income last year.

But it’s the company’s domestic and international propane distribution business that accounts for the lion’s share of segment earnings, at 39.1% and 22.7%, respectively, last year, for a total of 61.8% of operating profits.

The domestic propane business is primarily conducted through AmeriGas, the largest retail propane distributor in the U.S. And UGI’s international business is overseen by distributors domiciled in France, Belgium, Austria and the U.K., which have operating footprints across much of Europe and are among the largest distributors in their service territories.

Risk Reduction

This business diversification explains why UGI doesn’t trade at the same frothy valuation as some of its purer-play gas utility peers. But business and geographic diversification also help mitigate the risk of operating in an area as weather dependent as propane distribution.

Indeed, since propane is primarily used for heating, UGI racks up most of its earnings during the calendar first and fourth quarters.

In addition to diversification, UGI further mitigates the risk of seasonality by maintaining reasonable leverage—net debt to EBITDA (earnings before interest, taxation, depreciation, and amortization) of just 2.5 times—and a payout ratio below 50%.

The propane business is highly competitive, but also highly fragmented. As the biggest domestic player in this market and among the biggest players in its foreign markets, UGI has pursued a consolidation strategy to drive growth.

Looking ahead, management is targeting long-term earnings per share growth of 6% to 10% annually, which it expects to drive dividend growth of 4% annually.

As part of this strategy, UGI is attempting to reduce earnings volatility from seasonality by increasing fee-based margin in its midstream segment, expanding its overseas operations, and pushing for sales and exchanges of propane storage cylinders during the off-season. All of that is in addition, of course, to the efficient integration of a steady stream of future acquisitions.

Although UGI’s business mix is riskier than a pure-play natural gas utility or a fully regulated utility, its financial conservatism has consistently earned it one of the highest Safety Ratings in our coverage universe.