Last update on 2024-06-27

Sempra Energy (SRE) - Dividend Analysis (Final Score: 4/8)

Comprehensive analysis of Sempra Energy's (SRE) dividend, evaluating stability and performance across 8 criteria, scoring 4/8 for 2023.

Short Analysis - Dividend Score: 4

We're running Sempra Energy (SRE) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Sempra Energy's dividend yield of 3.1848% is currently below the industry average. Although the average dividend growth rate over the last 20 years is high (12.27%), there have been notable fluctuations and instances of negative trends. The payout ratio averages 73.13%, which is above the ideal 65% threshold, indicating less sustainability. Sempra has shown general stability in its dividend payments and has paid dividends for 26 straight years. However, its stock repurchase efforts have been inconsistent.

Insights for Value Investors Seeking Stable Income

Given the mix of positive and negative factors, Sempra Energy (SRE) may warrant cautious consideration for investors. They have a long history of paying dividends and strong growth rates, but the higher-than-preferred payout ratio and lower-than-industry-average dividend yields might be concerning for those prioritizing income stability. Potential investors should weigh these factors based on their individual financial goals.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield measures the annual dividends paid out by a company as a percentage of its stock price and reflects the income investors earn from dividends.

Sempra Energy's current dividend yield of 3.1848% is significantly below the industry average of 3.75%. Historically, Sempra Energy's dividend yield has fluctuated, peaking at 13.1156% in 2006 and reaching a low of 2.9636% in 2022. This downward trend in recent years suggests potential concerns about the company's ability to maintain or grow its dividend payouts, especially since a decreasing yield can indicate either falling dividends or rising stock prices. Given the higher yields in past decades, today's yield points to possible caution for income-focused investors looking for robust dividend returns. This lower-than-average yield in the current year reflects a weaker earning from dividends relative to industry standards, and it is a downside for those prioritizing income over other factors.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate is higher than 5% in the last 20 years?

Analyzing the Dividend Ratio provided: from 2003 to 2023, it is evident that the growth of the dividend per share ratio has been volatile with certain peaks, such as 2006 and significant declines, such as 2007. The average dividend growth rate over these 20 years stands at 12.27%, which significantly surpasses the 5% threshold. This trend, however, shows high volatility which may imply instability. In instances, such as 2007 and 2022, negative values also appear, indicating that the dividends fell in those respective years. Despite these periodic negative trends, the overall average suggests substantial growth, depicting a positive aspect for Sempra Energy's dividends in the long run.

Average annual Payout Ratio lower than 65% in the last 20 years?

The payout ratio is the proportion of earnings paid out as dividends to shareholders, typically expressed as a percentage. A payout ratio lower than 65% is generally considered sustainable.

Over the analyzed period from 2003 to 2023, Sempra Energy's payout ratio spans a very wide range from 26.13% to as much as 323.19%. The average payout ratio stands at 73.13%, which is significantly above the 65% sustainability benchmark. Several years have seen payout ratios exceptionally low, such as in 2004 (26.13%) and 2021 (48.78%), however, other years have models that average unsustainably high payouts like in 2015 (323.19%) and 2019 (208.16%). Hence, while there are positive instances of fiscal performance, the overall trend suggests that historically, Sempra's dividend payouts have been largely unsustainable. This raises concerns about the company's ability to maintain dividend payments under fluctuating earnings.

Dividends Well Covered by Earnings?

Explain the criterion for Sempra Energy (SRE) and why it is important to consider

Dividends are well covered by the earnings. This criterion assesses whether a company's earnings per share (EPS) sufficiently cover its dividends per share (DPS). A higher ratio of EPS to DPS suggests that the company generates ample earnings to support its dividend payouts, indicating financial stability and the ability to sustain or possibly even increase dividends in the future.

Dividends Well Covered by Cash Flow?

Why it is important to see if dividends are well covered by cash flow.

Dividends being well-covered by cash flow is an essential metric for any income-centered investor. It indicates that the company generates enough cash to not only sustain but also potentially grow its dividend payouts over time. This can often be a sign of financial health and longevity.

Stable Dividends Since the Company Began Paying Dividends?

Discuss the importance of stable dividends over the past 20 years and why stability in dividend payments, where the dividend per share did not drop by more than 20%, is important for income-seeking investors.

Over the past 20 years, the dividend per share (DPS) for Sempra Energy (SRE) exhibited a general upward trend. For instance, the DPS in 2003 started at $1, whereas in 2023, it reached $2.38. Looking into the years 2006 and 2019 demonstrates significant growth in DPS, reflecting SRE's consistent commitment to rewarding its shareholders. Notably, although there has been a drop in 2019, where the dividend per share fell from $4.4 to $2.29, this ratio was not below 20%. Various slight drops along the way reflect the financial market’s external factors rather than SRE's performance. On the whole, SRE’s consistent growth in dividends underscores financial stability and commitment to shareholders. Therefore, for income-seeking investors, SRE remains a solid choice as it provides income stability.

Dividends Paid for Over 25 Years?

Evaluating if a company has consistently paid dividends for over 25 years is vital because it signals financial stability, consistent profitability, and a shareholder-friendly approach.

Sempra Energy (SRE) has continuously paid dividends for 26 years (from 1998 to 2023), demonstrating a strong commitment to returning capital to shareholders. The annual dividend per share has generally shown an upwards trend; from $0.78 in 1998 to $2.38 in 2023. This long-term consistency is a positive indicator of Sempra Energy's robust financial health and disciplined cash management. Although there were some fluctuations, the overall capability to pay dividends in various market conditions underscores the company's resilience and reliability, which is highly favorable for long-term investors.

Reliable Stock Repurchases Over the Past 20 Years?

A consistent stock repurchase program indicates a company's commitment to returning value to its shareholders. It's a signal of financial health.

Sempra Energy has shown a scattered and inconsistent approach to stock repurchases over the past 20 years. From 2008 to 2023, there are only four distinct years where share buybacks were evident. Significant increases in the number of shares outstanding in various years suggest the issuance of new shares or lack of consistent buybacks during most years. The average repurchase rate of 7.152 over 20 years suggests infrequent buybacks. Overall, this inconsistency indicates a less reliable approach toward stock repurchases, which could be taken as a negative signal concerning long-term shareholder value return strategies.