The trailing P/E of 31.1x is substantially above the peer group median of roughly 19.6x, but the forward P/E of 16.75x suggests the market expects significant earnings growth, likely from the LNG infrastructure segment. The dividend yield of 2.9% is in line with peers like NEE and SO, but lower than DUK and D, indicating investors are accepting a lower current yield in exchange for growth optionality. This valuation premium appears justified only if the LNG projects achieve contracted cash flows on schedule; otherwise, the multiple could compress toward the regulated utility average.

The reported quarterly ROE figures, ranging from 0.2% to 2.4%, are not directly comparable to annual authorized ROEs because they are not annualized and include equity method investments and AFUDC. However, even annualizing the most recent quarter's ROE of 1.9% yields roughly 7.6%, which is below the typical 9.5-10% allowed return in California and Texas. This gap may indicate that the equity base is growing faster than rate base earnings, or that non-regulated segments are diluting returns. Investors should monitor whether future rate cases adjust for the higher cost of capital, as the current earned return appears insufficient to support the valuation premium.

The operating margin of 27.8% in 2026Q2 is robust, but it is not a clean measure of cost recovery because fuel and purchased power costs are passed through to customers. The more relevant metric is the spread between earned ROE and authorized ROE, which appears thin based on the quarterly ROE data. The volatility in operating margin, from 19.5% in 2025Q2 to 29.8% in 2026Q1, suggests timing of O&M expenses and regulatory deferrals. Investors should focus on unit O&M costs per customer and the recovery of wildfire mitigation capex, which are not visible in the aggregated margin data.

The debt-to-capital ratio of 0.46 is within the typical utility range of 45-55%, but the interest coverage of 2.18x is below the 3.0x threshold that rating agencies often consider adequate for a strong investment-grade profile. FFO/debt of 3.36% is also low, reflecting the heavy CAPEX cycle and the fact that a portion of earnings is non-cash (AFUDC). The increase in net interest expenses in the Parent & Other segment, as noted in recent context, suggests that refinancing at higher rates is eroding coverage. If interest coverage continues to decline, Sempra may need to issue equity to maintain its credit rating, which could dilute existing shareholders.

The dividend payout ratio of 103.6% in 2026Q2 is concerning because it suggests that reported earnings are not fully covering the dividend, likely due to non-cash charges or equity method losses. However, the cash flow statement shows operating cash flow of $1.6B per quarter versus dividends of $826M, providing a 3.8x coverage ratio, which is comfortable. The discrepancy between earnings-based and cash-based payout ratios highlights the importance of AFUDC and regulatory deferrals in the earnings figure. Investors should monitor whether the payout ratio remains above 100% as the CAPEX program matures, as this could force a dividend cut or a shift to external funding.