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Market Price (7/19/2016): $112.31/share; ST-Target: $140/share; NIV: $200/share
SRE: Steady as she goes delivering strengthening value
- Value proposition: Roughly double average utility EPS growth rate (SRE CAGR of about 12%), strengthening balance sheet, and about double average utility dividend growth (SRE CAGR of about 8%-9%) through long-term contracted diversified infrastructure development, investment and operations anchored by California Utilities at least through 2020. In addition to the high CAGR in EPS and dividend, SRE also plans to strengthen its balance sheet and return capital to shareholders. This is a rare combination.
- 2016 and 2020 EPS guidance unchanged at $4.60-$5.00 and $7.20-$7.80, respectively.
- Growing dividend: Plan includes growing dividend by some CAGR of 8%-9% through 2020, but will review after Cameron is fully on-line. Additional growth projects would accelerate dividend increases.
- Strong risk management philosophy drives predictability of earnings and cash flow: