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Wait and Watch? Why 47% of Analysts Rate ONEOK a ‘Hold’

ONEOK: 'Buy' or 'Hold' after Higher 4Q15 Earnings, Stock Fall?

(Continued from Prior Part)

Analyst recommendations for OKE

Of analysts surveyed by Bloomberg, 40% rated ONEOK (OKE) a “buy,” 47% rated it a “hold,” and 13% rated it a “sell.” The consensus target price for ONEOK in one year is $28.10. Over the same period, the low and high target prices for the stock are $23 and $40, respectively. Currently, ONEOK shares are trading near $21.40. If it attains the median target price within a year, it would mean a 31% price return for investors.

The above table shows recommendations and target prices for ONEOK from some of the brokers surveyed. ONEOK forms 0.9% of the WisdomTree Dividend ex-Financials ETF (DTN). DTN invests in high-dividend-yielding companies outside the financial sector.

As for its peers, 58% rate Kinder Morgan (KMI) a “buy,” 92% rate Enterprise Products Partners (EPD) a “buy,” and 40% rate Spectra Energy (SE) a “buy.”

Outlook for ONEOK

ONEOK reaffirmed its 2016 guidance of cash flow available for dividends of ~$675 million and dividend coverage ratio of ~1.3 times what it provided in December 2015. The company has a project backlog of $4–$5 billion, which is primarily fee-based.

OKE expects its quarterly dividends to remain flat at the current $0.62 per share. Its MLP, ONEOK Partners (OKS), expects distribution coverage at 1.0 times or better in 2016. This is based on current NYMEX (New York Mercantile Exchange) future strip pricing of $40–$45 per barrel of crude oil. It also assumes flat distributions compared to 2015.

ONEOK Partners also aims to bring down its leverage. It expects to achieve a debt-to-EBITDA ratio of 4.2 times or less by late 2016. OKS expects no public equity offerings in 2016 and “well into 2017.”

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