In this uncertain geopolitical environment, give me the sure dividend bet—like Texas running out of juice.
The state’s grid operator, ERCOT, has dished a record number of “conservation alerts” this year. Texans crank their air conditioners while new neighboring data centers guzzle electricity around the clock.
The grid is strained. The population is popping. New residents, factories and AI campuses are all plugging into the state’s aging grid at once. The math is no longer “mathing” and it’s about to get worse. ERCOT projects power demand will jump 62% by 2030—yikes!
And Oncor, the state’s largest utility, believes that is way too conservative. Its interconnection queue shows 186 GW of requests waiting to plug into the grid—more than double today’s peak demand (118% more!) and enough to power every home in Texas twice over!
Oncor isn’t a private company, of course. It’s a regulated utility. When it spends on poles, wires and substations, the state lets it earn a set return—typically 9% or so—on its investment.
So, “regulated” means guaranteed profits. When Oncor spends $1 billion on wires, regulators approve a 9% return on that spend. That’s why utilities love building more infrastructure. It’s guaranteed money!
And Oncor’s upside is essentially unlimited because there is no cap on the size of its “rate base,” the infrastructure upon which Texas calculates that sweet 9%. The more Texas builds, the bigger Oncor’s rate base.
The best way to buy Oncor is via its parent company Sempra Energy (SRE). Sempra is the smart “second level” AI play that vanilla investors don’t see from their first-story perches. Wall Street chases NVIDIA and Microsoft? Fine. We contrarians will gladly take the toll collector that wires their data centers to the grid!
Every new server farm means more substations, more high-voltage lines—and more returns for Sempra shareholders. Every billion dollars Sempra plows into Oncor’s grid are a billion-dollar asset that cash flows for decades.
Sempra plans a record $56 billion capital investment program over the next five years. More than half of this spend will boost transmission and distribution, connecting data centers to AI campuses.
What does $56 billion really buy? For Oncor, it means hundreds of new substations, thousands of miles of upgraded high-voltage line, and fleets of new transformers to handle surging loads. The company’s queue already includes projects—including in Texas—for tech giants like Microsoft and Amazon. Even if just half of the 186 GW in requests come to life, it’s still twice today’s peak demand.
In the regulated model, every new substation or mile of line Oncor builds joins its rate base. Bigger base? Bigger earnings. And bigger earnings fund bigger dividends! That’s why Sempra has been able to raise its payout for 20 straight years—and why its $56 billion spending plan doubles as a $56 billion dividend-growth engine.
Sempra’s payout has averaged 9% annual increases for 5 years, and it sits 84% higher than a decade ago. No wonder the stock’s up 82% over the same period! The stock price always follows the payout:
Sempra’s Payout Powers Its Stock Price
Including dividends paid, Sempra shareholders scored 154% total returns over the past decade. Not bad for a “sleepy” utility! And not nearly as risky as speculating on semiconductor chips. No tariff risks here. Sempra’s future gains are “sure things,” thanks to rising energy demand in its home state.
Shares yield 2.9% today. Its dividend raises will likely accelerate as the Texas grid is tapped for AI needs. Nine percent payout hikes will come easy in the years ahead, which means 11.9% yearly returns from a secure, regulated utility:
Sempra’s stock price has followed its “dividend magnet” higher over time. This is the hidden force behind Sempra’s current yield—it rarely moves because investors see the rising yield and grab it, bidding up the share price. Over the last 25 years, 3% or so has been the standard “baseline yield” for shares:
Current Yield is Steady Because Price Rises with Dividend
Sempra is the backdoor play that, until recently, nobody on Wall Street was talking about. It’s the company stringing the wires and building the substations that makes AI possible—and keep the lights on.
But since we added Sempra to our Hidden Yields portfolio just a few weeks ago, it has already rallied 9.2%. This is a 160% annualized gain from this backdoor AI “power broker.”
Unfortunately, you missed out on this quick winner by not having an active subscription to Hidden Yields. Fortunately, it’s a quick fix—activate your HY subscription here so that I can send you my next favorite “dividend magnet” play this Friday morning.