This week’s Stock of the Week is an energy company that is well-diversified but working hard to stay lean.
Sempra Energy (SRE) is the parent of San Diego Gas & Electric Company and Southern California Gas. It also has a South American Utilities segment involved in electricity generation and transmission and Sempra Mexico, which processes and distributes electricity and natural gas.
Sempra is essentially an energy conglomerate, although small by conglomerate standards, with market capitalization of $30 billion. Activist investors are now pushing for ways to boost the stock price, and Sempra is working to divest noncore holdings while also bringing costs under tighter control. Higher costs associated with liquefied natural gas operations will cause a dip in earnings this year. But the regulatory environment is favorable for Sempra’s primary California gas and electric operations, and growth in US production of natural gas will benefit Sempra’s storage and distribution systems.
Revenue was $11.2 billion last year and will likely be $11.7 billion this year and $12.3 billion in 2019. The dividend of $3.58/share/yr. recently yielded 3.1% and appears secure.
Fiscal year: December. Earnings: 2019 est./$6.20…2018 est./$5.28…2017/$5.42.
Geoff K. Dancey, CFA, is president and portfolio manager at Cutler Capital Management, Worcester, Massachusetts, which manages $320 million. CutlerCapital.com