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Sempra's Best Side? Gauging the Dividend Profile

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Sempra's Best Side? Gauging the Dividend Profile PART 1 OF 4

Sempra Energy’s Dividend: Why the Low Yield?

Sempra’s dividend yield

Sempra Energy (SRE), one of the leading utilities in California, declared a dividend of $0.82 per share in 1Q17, which represents a 9% increase over the previous quarter. The dividend will be paid on April 15, 2017. On an annualized basis, Sempra is expected to pay $3.29 per share this year, as compared to its per-share dividend of $3.02 in 2016.

Sempra Energy is currently trading at a dividend yield of 3%—well below industry average. Notably, the Utilities Select Sector SPDR (XLU) has a current dividend yield of 3.5%.

Sempra Energy&#8217;s Dividend: Why the Low Yield?

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Above average dividend growth

By comparison, peer large cap utilities Duke Energy (DUK) and Southern Company (SO) are currently trading at dividends yields of 4.2% and 4.4%, respectively—much higher than Sempra’s current yield—while the broader markets (SPY) (SPX-INDEX) have a dividend yield of 2%.

We should note here that Sempra Energy’s current yield may be lower, but its dividend growth rate was much higher than its peers. In the past five years, Sempra’s dividend has grown by more than 10%, compounded annually, which is one of the highest in the sector.

On the other hand, the dividend growth rate over the past five years for utilities at large has stayed close to 4%. Sempra expects its dividend to rise ~9% over the next several years.

We’ll investigate Sempra’s specific dividend profile later in this series, but first, let’s make some more key peer comparisons.

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