Thank you Rob. As a test I connected the sensor to a 5v supply (via a 9v battery and a voltage regulator) and then measured the sensor output with a multimeter (no connection to the arduino or voltage divider). To my surprise the maximum voltage I measured was of 2.9v (close distance limit). I wonder why is this happening when the specsheet says I should get Vcc as max? I checked the output from the regulator and it was spot on 5v.