ONEOK, Inc.’s OKE board of directors announced 2.2% increase in quarterly dividend to 93.5 cents per share from 91.5 cents. This will result in an annualized dividend payout of $3.74. The revised quarterly dividend will be paid out on Feb 14, 2020 to shareholders of record as of Jan 27, 2020.
The current annualized dividend yield of the company is 4.93%, which is higher than the industry’s 2.81% and the Zacks S&P 500 composite’s 1.76%. Increase in distributable income reflects on the company’s strong performance and cash flow position.
Reasons for the Dividend Hike
The company is benefiting from long-term fee-based commitments in the Natural Gas Gathering as well as Processing and Natural Gas Liquids segments. The company expects nearly 85% of its earnings in 2019 to be fee-based.
Strong cash flow generation capability enables ONEOK to boost shareholders’ value through dividend payout.
Will ONEOK Sustain Dividend Hikes?
The company expects 20% increase in adjusted EBITDA in 2020 from 2019 guidance midpoint. The key catalysts will be Natural Gas Flaring, Rocky Mountain NGLs, Arbuckle II Pipeline & MB-4 and Permian Basin projects. It also expects $4.5 billion in growth projects, which were declared earlier, to be completed through first-quarter 2020.
The company projected long-term EPS growth of 15.8% through Dec 12, 2018 to Dec 12, 2021. Moreover, increase in drilling activities in high productive regions will raise demand for the company’s midstream services. The company expects production volumes in the STACK and SCOOP areas to improve demand for pipeline services.
In addition, the acquisition of the ONEOK Partners is going to be accretive to company’s distributable cash flow from 2017 through 2021. We believe that increase in earnings and steady performance will facilitate the company to further increase annual dividend rate.
Utilities Continue to Reward Shareholders
Apart from ONEOK, other utilities are also revising dividend rates at regular intervals.
In November 2019, MDU Resources’ MDU board of directors announced a hike in the quarterly dividend to 20.75 cents per share, up 2.5% from the previous rate. In September, 2019, OGE Energy OGE announced that its board of directors has approved a 6% increase in the quarterly dividend rate. In the same month, IDACORP IDA announced that its board of directors has approved a 6.3% increase in the quarterly dividend rate to 67 cents.
Zacks Rank & Price Performance
ONEOK currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ONEOK’ shares have rallied 22.6% in the past 12 months compared with the industry’s rise of 16.9%.
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