ONEOK, Inc. (OKE) has increased its quarterly dividend by 9% to 36 cents per share from its earlier payment of 33 cents per share. As a result of this revision, the company’s annualized dividend will be $1.44 per share. The new annual dividend yield will be 3.2%, which will be higher than the industry average of 2.45%. This dividend-hike is effective from the fourth quarter of 2012 and will be payable on Feb 14, 2013 to shareholders of record as of Jan 31, 2013.
Previously, ONEOK had increased its dividend in Jul 2012. Quarterly dividend payout climbed 8% to 33 cents per share of common stock from 30.5 cents per share on a post-stock-split basis. The company values its owners and has been trying to boost their income by hiking the dividend payment each year for the last 7 years.
It is evident from ONEOK’s dividend-payment history that the company is always on the lookout for maximizing its shareholders’ wealth. In Sep 2012, the company expressed its intention to raise its total dividend by nearly 65% - 70% in the time span of 2012 to 2015. In full-year 2013, ONEOK intends to increase its dividend by 3 cents semiannually, subject to the required approvals. In the long term, it is targeting a dividend payout ratio in the range of 60% - 70%.
ONEOK’s third-quarter 2012 cash flow from operating activities was $762.3 million and cash balance was $978.8 million as of Sep 30, 2012. We believe strong liquidity position, including a credit facility of approximately $1.7 billion, will be sufficient to meet the company’s anticipated cash requirements and fund future growth opportunities over the next couple of years.
The market reacted positively toward the dividend-hike and the share price increased 2% and closed at $45.39 as of Jan 16, 2013. As we know that strong financial performance of ONEOK increases the investors’ expectation, the company’s continuous effort toward revision in dividend payment at regular intervals is able to boost their confidence.
Recently, another utility provider OGE Energy Corporation (OGE) increased its quarterly dividend by 6.37% to 41.75 cents per share from the prior payment of 39.25 cents per share. The annualized dividend will be $1.67 per share from the earlier payout of $1.57 per share.
Though ONEOK has a strong financial position and numerous future growth projects, we are skeptical about unstable commodity prices, over-dependence on weather patterns, stringent utility regulations and volatile credit markets, which can challenge the company’s future performance.
Tulsa, Oklahoma-based ONEOK Inc. is a diversified energy company, operating as a natural gas distributor, primarily in the U.S. The company currently has a short-term Zacks Rank #4 (Sell).