Sempra Energy (SRE) is Fully Certified, passing ALL Dividend System™ criteria. It has ‘Premier’ status being in the upper percentiles of this month’s stock universe. The company has increased dividends for 21 years, making it an untitled member of Dividend Nobility. We consider SRE to be a Growth & Income stock.
GROWTH: SRE’s 5-year average dividend growth rate is 8.1%, which is low when compared to the dividend universe average of 10.1%. Free cash flow has grown at an average rate of 30.7% per year for the last 5 years versus the dividend universe at 7.3%, so SRE is performing very well.
INCOME: SRE’s current dividend yield is 3.28%, a bit above this month’s average at 2.85% for our dividend universe.
SAFETY: We use the Dividend Coverage Ratio to measure the dividend’s safety – higher is better. SRE has a DCR of 2.1 which is good, exceeds the minimum requirement of 2.
VALUATION: The price at time of analysis was $127.41, which we consider Fairly Priced. A fair price based on historical PE ratio and earnings would be around $124.71. The average PE ratio of the S&P 500 is 38.29, versus SRE’s PE ratio of 9.88, well below the S&P 500 average PE, indicating great value; yet caution is indicated as there may be a reason the PE is so low. Our ‘Value Rating’ for Sempra Energy is 3.5 out of 5.0, meaning that both PS and PE moderately indicate value, compared to other dividend stocks currently available.
TIMING: the Dividend Yield and Price/Earnings Ratio indicate that SRE has ‘Medium+ ‘Buy’ Signal’ Regardless of the intensity (or lack thereof) of a signal, don’t eliminate a stock solely on one criterion.
QUALITY: We are testing this subjective quality evaluation. SRE has a ‘Quality Rating’ of 2.4 (out of 5), versus the average of 2.6 for this month’s dividend universe.
Based on our Dividend System™ comparative rankings, we rate Sempra Energy a ‘C-.’ It’s a solid income stock with continuously increasing dividends.
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