Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor’s dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company’s earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Sempra in Focus
Based in San Diego, Sempra (SRE) is in the Utilities sector, and so far this year, shares have seen a price change of 6.06%. Currently paying a dividend of $0.62 per share, the company has a dividend yield of 3.13%. In comparison, the Utility – Gas Distribution industry’s yield is 3.57%, while the S&P 500’s yield is 1.59%.
Taking a look at the company’s dividend growth, its current annualized dividend of $2.48 is up 4.2% from last year. In the past five-year period, Sempra has increased its dividend 5 times on a year-over-year basis for an average annual increase of 4.87%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company’s annual earnings per share that it pays out as a dividend. Right now, Sempra’s payout ratio is 55%, which means it paid out 55% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, SRE expects solid earnings growth. The Zacks Consensus Estimate for 2024 is $4.80 per share, with earnings expected to increase 4.12% from the year ago period.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that SRE is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Sempra Energy (SRE) : Free Stock Analysis Report
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