ONEOK OKE is benefiting from the acquisition of ONEOK Partners, higher fee-based earnings as well as structured investment to reinforce operation in abundant oil and gas basins in the United States.
The company is likely to gain from long-term fee-based commitments in the Natural Gas Gathering and Processing as well as Natural Gas Liquids segments. It estimates nearly 85% of its earnings in 2019 to be fee-based. From the fee-based solutions, the company expects 20% rise in adjusted EBITDA in 2020.
The Demicks Lake I plant and infrastructure project, which is supposed to be completed in the fourth quarter of 2019, will drive growth in the Natural Gas Gathering and Processing segment.
Higher Demand for Midstream Services
ONEOK expects a rise in demand of its midstream services due to expansion in drilling activities in high productive regions. The company’s natural gas transportation capacity in the second quarter increased 14% year over year. The company anticipates that recently-completed capital growth projects in the Permian Basin, STACK and SCOOP areas will improve transportation volume as well as raise demand for pipeline services.
Acquisitions & Distributable Cash Flow
The acquisition of the remaining interest in ONEOK Partners will be accretive to distributable cash flow from 2017 through 2021. ONEOK Partners’ financial strength, diversified operations, outstanding market connectivity as well as organized investments in organic projects and strategic acquisitions provide the company a competitive advantage.
The company expects 2019 distributable cash flow in the range of $1,820-$2,060 million. In the second quarter, distributable cash flow amounted to $540 million. The figure rose 19% from the year-ago quarter’s level. The current dividend yield of the company is better than the industry’s and Zacks S&P 500 composite’s yield.
ONEOK’s strong cash flow generation is strengthening its balance sheet and boosting the shareholders’ value through dividend payouts. During July, the company announced 2.8% increase in quarterly dividend to 89 cents from 86.5 cents.
ONEOK has been paying out dividends to shareholders for more than eight decades. The current annualized dividend of $3.56 reflects yield of 4.97%, which is better than the industry’s 2.7% and the S&P 500 composite’s 1.9%.
There are other companies from the same space that are paying dividend on a regular basis such as Alliant Energy Corporation LNT, Eversource Energy ES and Unitil UTL.
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