Meager Income

Pay Off Debt, Retire Comfortably on Meager Income, Win the Lottery, Not Necessarily in that Order

Using Dividends to Buy Sempra Energy

Posted on | June 10, 2014 | No Comments

The S&P 500 closed at 1950.79 today.  It is only 5 points down from yesterday’s record high of 1955.55.  With the S&P 500 setting new highs, I’m trying to stop myself from purchasing stock.  In the past, I’ve found myself chasing stocks on their way up and paying too much for them.  Almost every time, I would have been better off waiting a few weeks and letting the price come down.

Case and point is my purchase today of Sempra Energy.  I’ve been wanting to gain exposure to the Energy industry and to add a dividend paying utility stock to my portfolio.  My purchase today was motivated by a belief that SRE might continue to go up before it came down to a more reasonable earnings multiple.  

I believe it is overpriced because the trailing Price to Earnings ratio is currently at  23.60%.  I think a P/E ratio of 15 is on the high end.  I’m comforted by the fact that i’m using dividends to purchase the stock.  At today’s closing price of $100.17, SRE has a quarterly dividend of $.66 a share and a 2.46% yield.  They have not declared when the next dividend payment will occur but I’m looking forward to having the meager dividend income stream for a long time.

The money I used to make my purchase today came from the dividends that my investments have generated so far this year.  Instead of traditional dividend reinvestment, I’m using a selective form of it where I let the dividends accumulate and then choose how they would be best reinvested.  It is awesome to witness the compounding effect of dividends.

I hope to add to my position in SRE moving forward.


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