Oneok Offers Income Investors Three Choices


Some dividend-paying companies raise their payout every year, but the size and timing of the increases aren't known in advance.

Oneok ( OKE ), which markets natural gas and related services to distribution companies, industries and power generators, has sketched a more transparent strategy.

On Dec. 2, Oneok announced 2014 guidance that included a plan for increasing the dividend. The company projected a 44% increase on a dividend-paid basis -- from an annualized $1.48 paid in 2013 to $2.125 in 2014.

The strategy was linked to the completion of a spinoff.

On Jan. 9, Oneok said it would spin off its natural gas distribution business into a separate, publicly traded company calledOne Gas ( OGS ) and use the proceeds to lower Oneok's long-term debt. The new company debuted on the NYSE on Feb. 3.

The spinoff didn't affectOneok Partners ( OKS ), a subsidiary of Oneok and a master limited partnership that operates natural gas liquid pipelines and storage facilities. Oneok owns 41% of Oneok Partners.

So, income investors have three Oneok-related choices. How do the choices stack up?

Oneok pays a quarterly dividend of 40 cents a share. The annualized yield is 2.7%. Oneok grew earnings 8% last year. The Street expects EPS to fall 5% this year and rise 22% next year.

Oneok's subsidiary Oneok Partners offers a quarterly dividend that varies a bit. The February payout was 73 cents a share. The annualized yield is 5.6%. Earnings declined 23% last year. The Street expects EPS to improve 18% this year and 7% in 2015.

Recent spinoff One Gas has yet to pay a dividend. According to the company's 2014 guidance, One Gas will pay a quarterly dividend of 28 cents a share. On an annualized basis, the yield would be 3.1%.

Earnings grew 3% last year. The Street estimates 1% and 6% EPS growth in 2014-15.

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: Investing , Investing Ideas

Referenced Stocks: OKE , OGS , OKS

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