Sempra (SRE) Cash Flow Statement

OCF has been volatile, ranging from $784M in 2025Q2 to $3.1B in 2026Q2, but the trend shows a recovery in 2026. The regulated California and Texas segments provide predictable cash generation, though the Infrastructure segment's project-based cash flows introduce variability. The OCF-to-dividend coverage of 3.8x in 2026Q2 suggests a strong buffer, but investors should monitor whether this coverage persists as interest costs rise.

The CAPEX program is accelerating, driven by Texas transmission expansion and LNG development, with total CAPEX of $16.8B over the last four quarters. This level of investment exceeds operating cash flow by a wide margin, necessitating significant debt and equity issuance. The 2025Q4 CAPEX spike of $7.0B suggests a major project milestone, but the sustainability of this pace depends on regulatory approval and project execution. Investors should assess whether the rate base growth from this CAPEX will generate returns above the cost of capital.

The persistent FCF deficit is typical for a utility in a growth phase, but the scale of the deficit—averaging -$2.9B per quarter—requires continuous access to capital markets. Debt issuance has been steady at $1.0M per quarter, which appears nominal, suggesting reliance on other financing sources such as commercial paper or equity. The $1.2B equity issuance in 2024Q4 indicates a willingness to tap equity markets, but the recent net stock issuance has been minimal, implying a preference for debt. Rising interest rates could increase the cost of this external capital, pressuring the spread between allowed ROE and actual financing costs.

The dividend appears safe in the near term, with OCF consistently covering dividend payments, even in weaker quarters. However, the coverage ratio has been volatile, and the 2025Q2 low of 1.7x highlights the sensitivity to seasonal OCF fluctuations. As CAPEX continues to outpace OCF, the dividend is funded from external sources, which is sustainable only if the capital markets remain accessible. Investors should monitor whether management prioritizes dividend growth over balance sheet flexibility, especially given the rising interest expense in the Parent & Other segment.

The gap between net income and OCF is substantial, with OCF exceeding net income by $2.3B in 2026Q2, partly due to non-cash items like depreciation and AFUDC. While AFUDC is a legitimate regulatory mechanism, it inflates reported earnings without generating immediate cash, potentially misleading investors about the company's cash-generating ability. The cash earned ROE may be lower than the allowed ROE during periods of heavy construction, as cash returns lag accrual-based earnings. Analysts should adjust for these items to assess the true cash available for debt service and dividends.