Dominion Resources, Inc. (D), Sempra Energy (SRE): Three Utilities to Watch This Week

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Sempra Energy

Sempra Energy (NYSE:SRE) is right in the middle in terms of market cap, and is based on the West Coast, in San Diego. The company serves over 31 million people, and is actually the largest natural gas utility in the U.S. in terms of the number of customers served. The company operates in several segments, the largest of which are Southern California Gas (34% of revenues) and San Diego Gas & Electric (38%). The company also has a substantial South American business, with electric utilities in Chile, Peru, and Argentina.

The company is the most growth oriented of the three mentioned here, and its valuation and yield reflect that. Sempra Energy (NYSE:SRE) currently trades for 19.6 times this year’s earnings, which are projected to grow at around 8% annually going forward, and according to the company this rate could rise to 10% in the right conditions. Also, Sempra Energy (NYSE:SRE) pays a lower yield of 2.9%, representing just a 55% payout ratio. This also is a good indicator (although not always) of how aggressively a company plans to try to grow. A lower payout leaves more money to invest back into the company.

Thoughts

These are three very different companies with different risks and goals. Of the three, SCANA Corp (NYSE:SCG) is my preference right now due to their pioneering nuclear developments and very attractive valuation. Bear in mind that this is earnings season and all three of these companies are yet to report. The outcome of their earnings reports can change the valuation (and attractiveness of each company) literally overnight, so those who may want some utilities exposure in their portfolios should keep an eye on these companies and what they have to say during their earnings calls.

The article Three Utilities to Watch This Week originally appeared on Fool.com and is written by Matthew Frankel.

Matthew Frankel has no position in any stocks mentioned. The Motley Fool recommends Dominion Resources. Matthew is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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