When you think of energy discussions, it’s usually oil prices grabbing all the headlines. But while fuel prices often steal the spotlight, many tend to overlook another crucial energy resource in America: natural gas.
Natural gas is more than just a utility bill for everyday Americans. It fires up home appliances, heats water, and plays a pivotal role in industries like steel production, agriculture, and transport. Several factors, such as rising global demand for liquefied natural gas, technological strides, and favorable U.S. policies, have driven a surge in natural gas production recently. Over the last decade, we’ve registered a staggering 41% rise in natural gas output, greatly benefiting domestic energy firms.
Among the companies catching my attention this week is Oneok, which trades under the symbol NYSE: OKE—it’s pronounced “one oak.” With its roots in Oklahoma, Oneok has long been a key player in the natural gas sector in the central U.S. Although it has recently broadened its scope to include oil and petroleum, natural gas gathering, processing, and transportation remain the core of its operations.
Oneok boasts a vast network, overseeing more than 50,000 miles of natural gas pipeline. In the third quarter, they processed an impressive 3.236 trillion British thermal units per day, marking a 5% increase from the previous year. Investors might be interested to know that Oneok provides a solid dividend yield of 3.7%, and its stock has jumped 56% over the past year.
But let’s get to the crux of the matter: Is Oneok’s dividend secure, or is it in danger of reduction?
We need to delve deeper, starting with Oneok’s free cash flow growth. Back in 2020, Oneok faced a significant challenge with a free cash flow of -$296 million. However, it has since managed an impressive turnaround. Projections for 2024 suggest a figure exceeding $3 billion, indicating a 7% increase from 2023, with 2025 forecasts pointing to a remarkable 54% growth, reaching over $4.6 billion.
Oneok’s dividend payout ratio for 2023 stood at a reassuring 65%, comfortably under our 75% safety threshold. That said, in January, the company raised its dividend from $0.955 to $0.99 per share, inching the payout ratio up to about 79% for 2024, which somewhat lowered its rating.
On a positive note, examining Oneok’s dividend track record reveals no cuts in over a decade. Since 2002, they’ve practically increased their dividend annually, avoiding any reductions. With just one minor issue in its financial performance, I can confidently state that Oneok’s dividend remains secure.
Dividend Safety Rating: B
We’d love to hear from you! Which stock’s dividend safety would you like us to assess next? Drop the ticker in the comments section. If you’re curious about another stock we might have reviewed recently, head over to the Wealthy Retirement homepage, click “Search” at the top right, plug in the company name, and press “Enter.” Remember, the Safety Net tool is designed for analyzing individual stocks, not exchange-traded funds, mutual funds, or closed-end funds.
