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Sempra Energy (SRE - Analyst Report) announced that its board of directors has approved a 5% increase in the dividend on shares of the company's common stock to $2.52 per share, on an annualized basis, from $2.40 per share. The first quarterly installment of the new dividend is payable on Apr 15, 2013, to shareholders of record on Mar 28, 2013.

The underlying strength of the business and management’s inclination to return value to shareholders drove the dividend hike. Sempra Energy is one of the high-yielding (3.13%) stocks among its peers in the utility industry. Peers such as MDU Resources Group Inc. (MDU - Snapshot Report), Energen Corp. (EGN - Snapshot Report), and EQT Corporation (EQT - Analyst Report) yield a much lower dividend yield of 2.85%, 1.21% and 0.20%, respectively.

Sempra Energy is a Southern California-based energy services holding company involved in the sale, distribution, storage, and transportation of natural gas. Its subsidiary Sempra LNG develops, owns and operates liquefied natural gas receipt terminals serving North American markets. Sempra competes with other companies for construction and operation of liquefied natural gas receiving terminals and purchase of the same.

Sempra Energy’s diversified basket of businesses insulates its operations to a significant degree from regulatory rate risks, compared to integrated utility peers.

Sempra Energy appears to be well positioned given stable earnings through its utility subsidiaries, which cater to more than 20 million customers in central and southern California. The company is also implementing infrastructure improvement programs focused mainly on system reliability, smart grid technology to comply with California’s renewable energy mandate.

Positives in Sempra Energy’s story include steady progress at its Sunrise Powerlink transmission line, ongoing installations of smart meter, substation expansions, higher utility operating margins from regulatory rate hikes, and developing renewable power projects in the Pacific Southwest. Sempra Energy’s move to divest its commodities trading businesses to align its assets towards regulated utility is a big positive for the company in the long term. Currently Sempra Energy holds a Zacks Rank #2 (Buy).

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