Oneok Bumps Up Dividend 16 Times Since 2006

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Ample operating cash flow is a critical factor for a company's ability to increase a cash dividend, let alone pay one, to shareholders.

Oneok ( OKE ) sizes up well in this regard.

In 2011, the Tulsa, Okla.-based energy pipeline firm earned $1.67 a share, up 8% vs. a year ago. Cash flow from operations was nearly double that figure at $3.25 per share.

In 2012, Oneok's EPS edged 2% lower to $1.64. Meanwhile, its cash flow per share rose slightly to $3.33.

Operating cash flow minus capital expenditures will tell you how much free cash flow a company produces. It is from free cash flow that a company has the ability to take shareholder friendly moves such as buying back and retiring shares and paying dividends.

One may be concerned with the huge long-term debt seen on Oneok's balance sheet. Last year, the long-term debt to shareholders equity ratio grew to 306%, a staggering level. Among the larger gas transport and storage companies, this is indeed high. However, Oneok also boasts outstanding profit stability, which lowers the risk of default. Oneok's five-year Earnings Stability factor ranks 6 on a scale of zero (stable) to 99 (volatile).

Oneok (pronounced "One-Oak") is the general partner of Oneok Partners, a leader in gathering, processing, storing and transporting natural gas across the U.S. Oneok also owns a major supply system of natural gas liquids (NGLs) that connects the so-called Mid-Continent and Rocky Mountain regions with key energy market centers.

On Tuesday, Oneok Partners announced plans to invest an extra $650 million to $780 million in natural gas processing projects in the Williston Basin in North Dakota.

On Nov. 14, Oneok paid a quarterly cash payout of 38 cents a share. The annualized yield is 2.6%, higher than the S&P 500's yield of 2.39%. The company hiked its dividend by 2 cents in July, its 16th increase since January 2006.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , Investing Ideas

Referenced Stocks: OKE

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