Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. ONEOK Inc (NYSE:OKE) has returned to shareholders over the past 10 years, an average dividend yield of 4.00% annually. Does ONEOK tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. Check out our latest analysis for ONEOK
5 checks you should use to assess a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share amount increased over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
How well does ONEOK fit our criteria?
The current trailing twelve-month payout ratio for OKE is 187.97%, meaning the dividend is not sufficiently covered by its earnings. Going forward, analysts expect OKE’s payout to reduce to 125.16% of its earnings, which leads to a dividend yield of 5.58%. However, EPS should increase to $2.66, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of OKE it has increased its DPS from $0.76 to $3.18 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock. Compared to its peers, ONEOK produces a yield of 4.78%, which is high for Oil and Gas stocks.
Keeping in mind the dividend characteristics above, ONEOK is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three key aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for OKE’s future growth? Take a look at our free research report of analyst consensus for OKE’s outlook.
- Valuation: What is OKE worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether OKE is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.