Sempra Energy (NYSE:SRE - News), based in San Diego, is a Fortune 500 energy services holding company with 2003 revenues of $7.9 billion. The Sempra Energy companies' nearly 13,000 employees serve more than 10 million customers in the United States, Europe, Canada, Mexico, South America and Asia.
[Source: Company Press Release]
Reasons to Invest:
Wow! What a tough month August has been so far. Did you know
that August is historically the worst trading month for DOW
Industrials and the second worst trading month for the NASDAQ.
Besides historical data, I continually find it difficult to
digest how many bearish catalysts are present in the market.
It's time to face the facts... investors are worried about
terrorist threats at the Olympics in Athens, as well as the
Republican National Convention in New York. Furthermore, the
Trade Balance jumped up by a margin of 8.9 billion for the month
of June, which is the largest gap seen since February 1999. In
my opinion, I don't see any events on the horizon that are going
to provide any sort of significant impact on reaccelerating Wall
Street. Greenspan says that he feels we are on the midst of
recovery and that all of this data is just a soft patch. What do
Will the market recover? Of course it will. When? At this
point I think even Nostradamus would have a hard time predicting
when the market will turn around. My best guess is after Labor
Day. After all, August will be behind us, the summer will be
over, and generally speaking traders are going to place their
bets once the summer doldrums pass. Another thing to keep in
mind is that stocks have gone from overextended, to extended, to
flat or down in the past few months. While this is a sign that
Bears are definitely not in hibernation, the length of the
downtrend, coupled with the volatility indexes (VIX.X, VXO.X,
VXN.X) near their highs, is generally a sign that the market is
near its bottom. Once we find out what levels are going to hold
up as support, we will be able to purchase a lot of stocks that
are way undervalued, which will entice many new positions from
both long and short-term traders. Let's cross our fingers and
pray for a rebound, come September.
Okay, enough with the tangents. It's time to spotlight one stock
that is trending higher as opposed to lower like the major
indices. In order to find a quality DRIP in this type of market
you really need to find a sector that is outperforming the
current downtrend. I spent the better part of a day researching
candidates that were worthy of Drip Advisor's limelight only to
be overwhelmed by how horrific stocks have been performing.
Nonetheless, Sempre Energy (NYSE:SRE) is this week's DOTW. I
like SRE for several reasons. For starters, the stock trades on
high volume, offers a hefty dividend, is reasonably priced, and
has been in an upward regression channel since October of 2002.
I also like SRE because it has strong relative strength in
comparison to the Utility Index (UTY.X), which has also been
For the second quarter, Sempre's revenues increased 16%, and net
income boomed higher by 50%. The company also reaffirmed their
Q4 guidance, which bodes well for new positions, and usually
gives shorter-term traders more confidence in future investments.
Today, the company added their 1,500th local customer providing
energy from wind and solar power to the region's energy grid.
From what I can understand, SDG&E (a subsidiary of SRE) has a
net-metering program that allows customers to install small
renewable energy systems like solar arrays and wind turbines to
their house. The customers that decide to do this qualify for
special meters that run backwards when the renewable system is
sending energy into SDG&E's electrical grid. This grid then
basically stores the energy that customers are receiving, and
uses it when power outages occur. On that note, just imagine
how beneficial than can be to SRE's stock. Basically they're
getting their customers to provide their grids with free energy,
which they then sell to other members in their system. This has
to boost profits, and I speculate that this could really help
them stay in-line, or provide an upside-surprise on their fiscal
estimates. Remember, we want to find DRIPs that are going to
continually beat analysts expectations, and SRE is shaping up to
stay energized, throughout next year.
From a technical standpoint, SRE looks pretty solid. The stock
currently has a Point-and-Figure Bullish Price Objective of
42.50, which I feel is quite achievable, and actually will be
bumped higher in the next year.
Since October 2002, the chart has been trending higher inside of
a regression channel that has proved to be support/resistance for
the stock for that entire period. Unlike most of the charts that
you will find right now, SRE is using its simple moving averages
as support for higher ground, and has only fallen below its 200
DMA for a week-long period back in November 2003.
The MACD indicator on the Weekly chart is giving off a buy
signal. Needless to say, I note the 10-DMA over the 20-DMA,
which is generally a good sign of a continuation of the bullish
trend. Additionally, on August 4th, SRE closed at its all time
high of 36.46. Since SRE just pegged this new high, chances are
good that the level will be broken again. The fact that there is
no overhead resistance to "de-energize" shares, also bodes well
for us DRIP investors.
In respects to dividends, SRE divvies out $1.00/share owned/year,
which tabulates out to a 2.81% annual dividend yield. The last
dividend was paid in July, so it looks like we are going to have
wait until September before our dividends can be reinvested.
However, this gives us roughly two months to get enrolled and
This ends another exciting episode of the DripAdvisor.com Drip of
the Week. Stay tuned next week, as we will spotlight another
stock worthy of the DripAdvisor.com limelight.
Until Next Week,
Strong Buy 4
Strong Sell 0
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Temper Enrollment: Yes
Min/Max Investment = $25-$150,000/year
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San Diego, CA 92101
Phone: (619) 696-2034
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