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Oneok Bumps Up Dividend 16 Times Since 2006

By: Investor's Business Daily
Posted: 11/19/2013 6:40:00 PM
Referenced Stocks: OKE

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.