Investing is a lot like grocery shopping. You see a fancy steak (a high-flying growth stock) priced at a premium, and then there’s the discount aisle with perfectly good products, slightly bruised but still solid (undervalued fixed-income securities). Right now, my shopping cart has a fresh helping of SREA—Sempra’s 5.75% Junior Subordinated Notes due 2079—which I picked up during the recent market downturn.
Why SREA?
Sempra Energy (SRE) is the parent company behind SREA, meaning this junior debt is ultimately tied to their financial health. And let’s be real—utility companies like Sempra aren’t going anywhere. People need electricity, and in the world of investment, stability is an underrated superpower.
On a sidenote, I often swing trade SRE (Sempra’s common stock). SRE priced out of my algorithm for a few months but to my surprise pulled back to target. SREA is my long-term play and when I checked the price, it too had a pull-back and is trading below Par. Unlike common stock, it behaves more like a bond, offering predictable income with less drama—like that one friend who always shows up on time but never brings anything to the party.
Understanding Junior Debt (or, Why I Sleep at Night)
If Sempra ever goes belly-up (unlikely, but let’s play out the worst-case scenario), junior subordinated debt like SREA takes priority over preferred shares in liquidation. That’s right—while shareholders are left hoping for scraps, junior debt holders have a slightly better seat at the table to preferred then common. It’s still below senior debt, but hey, at least it’s not dead last.
The Math Behind the Buy
SREA’s par value is $25, but it’s currently trading below that initial price. That means I’m essentially buying income at a discount. While many income investors chase yields like they’re in a Black Friday stampede, I prefer a more measured approach. Right now, SREA is offering a 6.18% annual yield with quarterly payouts of $0.3594 per share. Not too shabby for an investment backed by a company with a strong track record, in my opinion.
The Market Move
During the recent downturn, I grabbed additional shares of SREA, reinforcing my long position in three accounts. Why? Because when the market gets skittish, I prefer to be greedy. A quality security selling at a discount? I’ll take it. Meanwhile, I continue to swing trade SRE, taking advantage of price movements and keeping my portfolio lively.
Final Thoughts (and a Friendly Nudge)
SREA isn’t the flashiest investment, but that’s exactly why I like it. It’s the slow-and-steady workhorse in my portfolio, quietly paying out while I take bigger risks elsewhere. If you’re considering adding some fixed-income exposure to your portfolio, SREA is worth a look—but as always, do your own research before jumping in.
Now, if only my grocery bill paid me a 6.18% return every quarter.
Disclaimer: This post reflects my personal investment decisions and is not financial advice. Always conduct your own research or consult with a financial advisor before making investment choices.