SRE Stock: Is Sempra Energy a Buy? | LNG & Utility Play

Sempra operates the critical energy tollbooth connecting California consumers, Texas power markets, and Mexican industrial demand — with a growing LNG export platform at Port Arthur that positions it to collect fees on every molecule of natural gas flowing to global markets.

Last updated: 2026-02-02 · Data: Yahoo Finance, SEC filings, company investor presentations

The Business

Sempra operates some of North America's most critical energy tollbooths — the gas pipelines and LNG terminals that connect Mexico's growing energy appetite to U.S. supply. Through its Sempra Infrastructure division, the company owns strategic LNG export facilities and natural gas pipelines spanning from South Texas to Central Mexico. This isn't your grandfather's utility. While Sempra still operates regulated electric and gas distribution in California, the real value driver is its position as the energy bridge between the world's largest gas producer (the U.S.) and Latin America's fastest-growing energy market (Mexico).

The tollbooth model here is particularly compelling: Sempra collects fees on every molecule of gas that flows through its pipes and every cargo of LNG that moves through its terminals. The Cameron LNG facility in Louisiana processes up to 12 million tons per year, while the company's Mexican pipeline network includes over 1,000 miles of transmission infrastructure. These aren't assets you can easily replicate — they require decades of permitting, billions in capital, and relationships built over generations.

By the Numbers

The Tollbooth Thesis

Sempra sits at the epicenter of two unstoppable forces: U.S. gas abundance and Mexican energy demand. Mexico's electricity consumption grows 3-4% annually, driven by nearshoring manufacturing and population growth. The country banned new long-term oil and gas contracts in 2021, creating a supply crunch that Sempra's pipelines help solve. Every new Tesla factory in Nuevo León, every data center in Querétaro, every semiconductor fab in Tijuana needs reliable gas-fired power — and that gas flows through Sempra's pipes.

The LNG side tells an even better story. Cameron LNG is one of only seven operating LNG export terminals in the U.S., giving Sempra access to global gas price spreads that can exceed $20/MMBtu during supply crunches. The company has locked in 20-year take-or-pay contracts with creditworthy counterparties including Total, Mitsui, and Mitsubishi. These contracts guarantee revenue regardless of actual gas flows — the definition of tollbooth economics.

Sempra's $30+ billion capital program through 2028 focuses on expanding these cash-generating assets. The Port Arthur LNG project in Texas will add another 13.5 million tons of annual capacity, while Mexican pipeline expansions target the industrial corridors where manufacturing is reshoring from Asia.

The Risks

• Regulatory whiplash in Mexico — AMLO's energy nationalism created project delays and political risk that could resurface

• LNG market volatility — Global supply additions from Qatar and Russia (if sanctions lift) could compress spreads

• California wildfire liability — The utility operations still face potential massive wildfire claims

• Execution risk on megaprojects — Port Arthur LNG is a $13+ billion bet that must be delivered on time and budget

• Interest rate sensitivity — The heavy debt load (81% debt-to-equity) amplifies financing costs in rising rate environments

Income Angle

The 2.96% dividend yield looks modest until you consider the growth trajectory. Sempra has raised its dividend for six consecutive years, with the payout growing from $1.90 to $2.58 since 2019. The 79% payout ratio provides coverage while leaving room for increases as major projects come online. Unlike pure-play utilities grinding out 2-3% annual increases, Sempra's dividend should accelerate as LNG projects reach commercial operation.

This dividend is backed by contracted cash flows from investment-grade counterparties, not commodity prices. The utility operations provide a stable base load of earnings, while the infrastructure projects offer upside optionality. For income investors seeking real-asset exposure with growth potential, Sempra offers both defensive characteristics and participation in the global energy transition.

The Bottom Line

Sempra owns irreplaceable energy infrastructure positioned at the intersection of U.S. supply abundance and Mexican demand growth. The negative free cash flow reflects heavy capex on projects that will generate returns for decades, not operational weakness. At current prices, you're buying one of North America's best energy tollbooths at a reasonable multiple to what should be much higher earnings in 2-3 years.

Related Research

• California Power Grid Risk Assessment
• XLE: Energy Select Sector SPDR
• Texas Power Grid Risk Assessment
• XOP: SPDR S&P Oil & Gas Exploration
• VDE: Vanguard Energy ETF

Frequently Asked Questions

Is Sempra (SRE) a good investment?

Sempra combines regulated California utility earnings (SDG&E, SoCalGas) with high-growth LNG export and Texas utility operations. This mix offers both defensive income and commodity-adjacent upside. The stock typically yields 3-3.5% with 6-8% earnings growth, driven by LNG infrastructure investment and California rate base growth.

What is Sempra's LNG business?

Sempra Infrastructure is developing the Port Arthur LNG facility in Texas, one of the largest LNG export terminals in North America. Long-term contracts with global buyers provide fee-based cash flows that are less sensitive to natural gas prices. This gives Sempra exposure to the global energy security trade without direct commodity risk.

How does Sempra benefit from California's energy transition?

SDG&E and SoCalGas earn regulated returns on grid hardening, wildfire mitigation, and electrification infrastructure in Southern California. Despite challenging regulation, California's aggressive clean energy mandates drive massive capital investment that grows Sempra's rate base at above-average rates.

What are the risks to Sempra Energy?

California regulatory risk is the biggest concern — wildfire liability, rate case outcomes, and political pressure on gas utilities create uncertainty. LNG project execution risk and cost overruns, Mexican political risk for its IEnova subsidiary, and rising interest rates on capital-intensive projects round out the risk profile.

This analysis is part of Energy Macro's Tollbooth Royalties research. For our complete infrastructure income framework, see The Blackout Fortune Playbook.

Last updated: February 1, 2026 | Data: Yahoo Finance, SEC filings, company investor presentations