Tuesday, July 29, 2014

Oneok Ptrs (OKS) 2014 Review

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.

   
        

   
7/14

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