Sempra's Dividend Analysis
Assessing the Upcoming Dividend and Financial Health of Sempra (NYSE:SRE)
Sempra (NYSE:SRE) recently announced a dividend of $0.6 per share, payable on 2024-01-15, with the ex-dividend date set for 2023-12-05. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Sempra's dividend performance and assess its sustainability.
What Does Sempra Do?
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Sempra Energy serves one of the largest utility customer bases in the United States. It distributes natural gas and electricity in Southern California and owns 80% of Oncor, a transmission and distribution business in Texas. SoCalGas and San Diego Gas & Electric distribute gas to more than 20 million customers, while Oncor serves more than 10 million Texas customers. Sempra Infrastructure partners, of which Sempra holds a controlling ownership, owns and operates liquefied natural gas facilities in North America and infrastructure in Mexico.
A Glimpse at Sempra's Dividend History
Sempra has maintained a consistent dividend payment record since 1984, with dividends currently distributed on a quarterly basis. The company has increased its dividend each year since 2000, earning it the status of a dividend achievera prestigious recognition for companies with at least 23 consecutive years of dividend increases. Below is a chart showing annual Dividends Per Share to track historical trends.
Breaking Down Sempra's Dividend Yield and Growth
As of today, Sempra currently has a 12-month trailing dividend yield of 3.22% and a 12-month forward dividend yield of 3.25%, suggesting an expectation of increased dividend payments over the next 12 months. Over the past three years, Sempra's annual dividend growth rate was 5.80%, which extends to 6.90% over a five-year horizon, and over the past decade, the annual dividends per share growth rate stands at 7.20%. Based on Sempra's dividend yield and five-year growth rate, the 5-year yield on cost of Sempra stock as of today is approximately 4.50%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, Sempra's dividend payout ratio is 0.55. Sempra's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Sempra's profitability 7 out of 10 as of 2023-09-30, suggesting good profitability prospects. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Sempra's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors. Revenue is the lifeblood of any company, and Sempra's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Sempra's revenue has increased by approximately 5.90% per year on average, a rate that underperforms approximately 59.14% of global competitors. The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Sempra's earnings increased by approximately 8.90% per year on average, a rate that underperforms approximately 37.81% of global competitors. Lastly, the company's 5-year EBITDA growth rate of 29.70%, which underperforms approximately 10.14% of global competitors.
Next Steps
In conclusion, Sempra's consistent dividend payments, impressive growth rate, and moderate payout ratio reflect its commitment to shareholder returns. Combined with a strong profitability rank, these factors suggest that Sempra is positioned to continue its dividend achievements. However, investors should also consider the growth metrics which indicate some areas where Sempra underperforms its global competitors. As value investors, it is crucial to balance the attractive dividend aspects with the company's overall financial health and market position. Will Sempra's strategic initiatives enable it to overcome these growth challenges and sustain its dividend legacy? For those seeking high-dividend yield opportunities, GuruFocus Premium users can explore options using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
