Sempra Energy (SRE) has announced that it will pay an increased dividend in first- quarter 2014. The board of directors has raised its quarterly dividend rate by 4.8% sequentially to 66 cents per share. The incremental dividend will be paid on Apr 15, 2014 to stockholders of record as of Mar 27.
On an annualized basis, Sempra Energy’s dividend rate will come to $2.64 per share, up from the previous pay-out of $2.52 per share. The annual dividend yield will be 2.8%, higher than the industry average of 2.4%.
We note that Sempra Energy increases quarterly dividend rate once in a year. The last dividend hike was in Feb 2013. On this occasion, quarterly dividend increased 5% to 63 cents from the earlier rate of 60 cents per share.
We appreciate Sempra Energy’s practice of distributing incremental dividends. The company’s stable cash generation capacity and financial position help to support its commitment to improve shareholders’ value. Sempra Energy’s cash balance was $1.1 billion as of Sep 30, 2013 and cash flow from operating activities was $1.3 billion during the first nine months of 2013.
Apart from paying regular dividends, the strong financial position enables Sempra Energy to expand its existing operations. The company is implementing infrastructure upgrade programs focusing primarily on system reliability, smart grid technology and compliance with California’s renewable energy regulations.
Sempra Energy’s strong infrastructure expansion program will boost its scale of operations, thereby meeting increased customer demand. These initiatives are expected to ensure cash inflows and fulfill fund requirement for paying dividends. The company’s strategy of paying dividends at regular intervals will help to retain investors’ attention on the stock.
Sempra Energy currently has a Zacks Rank #3 (Hold). However, some better-ranked stocks in the same sector include Southwest Gas Corporation (SWX), Vectren Corporation (VVC) and Exelon Corporation (EXC). All these stocks hold a Zacks Rank #2 (Buy).
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