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Big Move: Sempra Energy Agrees to Buy Oncor

PART:
1 2 3 4 5
Part 4
Big Move: Sempra Energy Agrees to Buy Oncor PART 4 OF 5

Sempra Energy’s Current Valuation and Dividend Profile

Valuation

Sempra Energy (SRE) stock has largely tracked broader utilities (XLU) in the past year. Like many other utility stocks in the sector, Sempra Energy appears to be trading at a fair premium to its historical average. Currently, it’s trading at an EV-to-EBITDA valuation multiple of 13.3x, while its five-year historical average is ~12.8x. The industry average is ~11x.

Sempra Energy’s peers and California utilities such as Edison International (EIX) and PG&E (PCG) have valuation ratios of ~9.5x and 9x. PG&E and Edison International seem to be trading at a fair discount compared to the industry average.

Sempra Energy’s Current Valuation and Dividend Profile

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NextEra Energy (NEE) is trading at valuation ratio of ~13x, while Duke Energy’s (DUK) valuation multiple stands near 12x.

Historically, US utility stocks traded near an EV-to-EBITDA valuation multiple of 8x–9x. Currently, they’re trading at ~11x.

PE multiple

US utilities’ PE (price-to-earnings) multiples have also risen in the last few quarters. Historically, they traded near a PE multiple of 14x–15x. Currently, they’re trading at ~17x–18x. Sempra Energy has its PE multiple near 17.5x. Edison International and PG&E have PE multiples near 19x and 18x.

Dividends

Sempra Energy is trading at a dividend yield of 2.9%—lower than the industry average of 3.6%. However, what’s striking in its dividend profile is its dividend growth. In the last five years, Sempra Energy managed to grow its per share dividend by more than 10% compounded annually. It was one of the highest dividend growths among SPX utilities (XLU). The industry’s average dividend growth was 4.2% during the same period.

Read Sempra Energy’s Dividend: Why the Low Yield? to learn more.

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