ONEOK: 25+ Years Of Uninterrupted Dividends From This Toll Road-Like Business

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With each nan talk astir layoffs hitting agency jobs, peculiarly successful nan tech sector, it's important to attraction connected one's ain nest egg. That intends being financially resilient successful nan arena of a awesome life arena specified arsenic a occupation loss.

That's why it pays to put successful toll-road for illustration businesses that person dependable gross streams. In turn, they supply investors pinch dividend income that's little susceptible to economical downturns.

This brings maine to ONEOK (NYSE:OKE), which is an power midstream institution that's awesome for investors who don't for illustration dealing pinch Schedule K-1s travel taxation time.

The banal has done alternatively good since my past bullish return connected it successful precocious September, giving investors a 34% full return since then, and acold surpassing nan 11% return of nan S&P 500 (SPY) complete nan aforesaid timeframe. Let's research why OKE remains a bully bargain astatine coming for income investors.

Why OKE?

ONEOK is simply a ample midstream corp that owns a premier postulation of earthy state liquids systems, connecting suppliers successful nan Rocky Mountain, Mid-Continent, and Permian Regions of nan U.S. to cardinal markets.

It's besides vertically integrated pinch an extended web of gathering, processing, retention and proscription assets. This business exemplary enables ONEOK to seizure profits crossed nan midstream worth chain.

It besides helps that nan mostly of OKE's net are interest based, and thereby not tied to swings successful commodity prices. This ranges from 80% fee-based for OKE's earthy state gathering and processing conception to 90% and 95% for nan earthy state liquids and earthy state pipelines business segments.

Plus, nan immense mostly (around 85%) of OKE's customers are finance people rated, providing further insulation from economical uncertainty. OKE is besides expected to make important amounts of free rate travel successful this and nan coming years, pinch which it could materially ramp up its stock buybacks, arsenic noted by Morningstar successful its caller analyst report:

With nan reduced superior program, Oneok is forecast to person worldly levels of excess rate travel successful 2023, possibly 24 months down different U.S. midstream peers to bargain backmost much stock. We estimate location could beryllium up to $675 cardinal successful buybacks successful 2023, though knowing Oneok's penchant for uncovering accretive maturation projects, this is besides arsenic apt to beryllium plowed backmost into charismatic maturation assets.

Looking ahead, OKE is well-positioned to use from beardown world request for NGL, which has a wide scope of uses, ranging from petrochemicals to location heating and cooking. As shown below, some LPG and Ethane NGL products are expected to spot continued maturation done astatine slightest 2040.

Investor Presentation

Notably, J.P. Morgan (JPM) precocious upgraded OKE's shares from a value target of $71 to $75, seeing worth successful its Bakken shale exposure, arsenic noted by their expert below:

The Bakken's astonishing 40-plus rigs constituent to dependable accumulation aft nan caller storms wane and wintertime slows down, according to JPM's Jeremy Tonet, adding Oneok "clearly possesses nan highest Bakken-rich gas/NGL measurement operating leverage, pinch important torque to NGL measurement maturation and incremental ethane extraction."

Meanwhile, OKE carries a safe equilibrium expanse pinch a nett indebtedness to EBITDA ratio of 3.8x, sitting beneath nan 4.5x level that ratings agencies mostly see to beryllium safe for midstream companies. Management besides views getting down to nan 3.5x level arsenic being its semipermanent goal.

Importantly for dividend investors, OKE has paid an uninterrupted dividend (no cuts) for complete 25 years, and precocious raised its dividend by 2.1% past period (5-year dividend CAGR of 5.5%), resulting successful a 5.7% guardant yield. The caller dividend besides remains well-covered astatine a 67% payout ratio based connected trailing 12 months' operating rate flow.

Lastly, OKE is not arsenic inexpensive arsenic it was erstwhile I past visited it successful precocious September, but remains appealing astatine nan existent value of $67.26 pinch an EV/EBITDA of 13.3, particularly aft its caller driblet from nan $70 level.

Seeking Alpha

With imaginable for worldly betterment successful free rate travel this year, OKE could return much superior to shareholders via buybacks aliases prosecute accretive maturation projects. Analysts person a statement Buy standing pinch an mean value target of $71.42, which translates to a imaginable 12% full return complete nan adjacent 12 months.

Investor Takeaway

ONEOK is an charismatic midstream player, offering investors a safe dividend that's been uninterrupted for complete 25 years, and fee-based profits, which are mostly insulated from commodity value volatility. OKE besides enjoys beardown Bakken shale exposure, from which it could extract appealing worth done its extended gathering, processing, retention and proscription network. Lastly, while OKE is nary longer cheap, it remains reasonably priced for perchance coagulated semipermanent income and growth.

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