ONEOK Inc. (OKE) has announced that it will pay an incremental dividend in the first quarter of 2014. The board of directors has increased the quarterly cash dividend rate by 5.3% sequentially and 11.1% year over year to 40 cents per share. The increased dividend will be paid on Feb 18, 2014, to stockholders of record as of Feb 10.
During a press release in Dec 2013, ONEOK Inc. had expressed its intention to hike its quarterly dividend rate to 56 cents per share from 38 cents per share, after the completion of the ONE Gas transaction.
For 2014, ONEOK Inc. intends to raise the dividend rate by 1.5 cents per share per quarter, subject to the board’s approval. In the long term, the company is targeting to maintain a dividend coverage ratio of about 1.05 times, subject to the approval.
The company also plans to raise the average annual dividend in the range of 20% – 25% between 2013 and 2016. This includes the estimated dividend hike in 2014 and 10% yearly increases in the years 2015 and 2016.
ONEOK Inc.’s policy of paying incremental dividends supports its commitment to improve long-term value for shareholders. The company has increased its dividend 17 times since 2006. The last quarterly dividend hike was made in Jul 2013. The quarterly dividend had increased 5.6% to 38 cents per share from the earlier payout of 36 cents per share.
The company’s cash flow from operating activities during the first nine months of 2013 was $1.0 billion while the cash balance was $0.8 billion as of Sep 30, 2013. A strong financial position helps ONEOK Inc. to meet its anticipated cash requirements for dividend payment and future projects.
Further, ONEOK Inc. plans to invest $2.3 billion in 2014. Of this investment, the majority will be allocated to several growth projects under ONEOK Partners, L.P.’s (OKS) portfolio. This is to cope with the increased demand from natural gas producers and processors. These initiatives would boost the company’s profitability in the long run, which in turn will enable it to provide higher returns to its shareholders.
ONEOK Inc. currently has a Zacks Rank #3 (Hold). However, some better-ranked stocks in the same industry include Chesapeake Utilities Corporation (CPK) and MDU Resources Group Inc. (MDU), each with a Zacks Rank #2 (Buy).
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