ONEOK Partners
engages in gathering, processing, storing and transporting natural gas in the US . This partnership has earned an 11-20% return
on equity over the last five years and has grown profits and dividends at a 5-6%
rate. Earnings and dividends should
continue to advance at a moderate pace as a result of:
(1) a broadly
diversified geographic and customer base,
(2) strong cash
flow allowing acquisitions and new projects.
(3) consistently
raises cash distribution.
Negatives:
(1) it is
exposed to the fluctuations of commodity [natural gas] prices,
(2) it doesn’t
own all the land on which its pipelines and other facilities are located;
hence, costs can rise as a result of contract renewal,
(3) its
operations are subject to numerous federal, state and local regulations.
OKS is rated B++
by Value Line, has a 55% debt to equity ratio and its stock yields 5.4%. If the company continues to grow its dividend
at a 6% rate, the total return on this stock makes it an attractive bond
substitute.
Statistical Summary
Stock Dividend Payout # Increases
Yield Growth Rate Ratio
Since 2004
OKS 5.4% 6% 88 6
Ind Ave 6.2 7 75 NA
Debt/ EPS Down Net Value Line
Equity
ROE Since 2004 Margin Rating
OKS 55% 11% 4 4% B++
Ind Ave 52
16 NA 15 NA
Chart
Note:
OKS stock made great progress off its March 2009 low, quickly surpassing the downtrend
off its May 2007 high (straight red line) and the November 2008 trading high (green
line). Long term it is in an uptrend
(blue lines). Intermediate term it is in
an uptrend (purple lines). The wiggly
red line is the 50 day moving average.
The High Yield Portfolio owns a 50% position in OKS. The upper boundary of its Buy Value Range is
$50; the lower boundary of its Sell Half Range is $75.
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