ONEOK Inc. (OKE), yesterday, boosted its third quarter dividend by 4.3% and authorized a $750 million buyback program.
ONEOK will now pay a quarterly dividend of 48 cents per share, versus 46 cents previously, bringing the company’s annualized dividend to $1.92 per share. The dividend will be paid on November 12, 2010 to shareholders of record on October 29, 2010.
In the past, ONEOK has constantly increased its dividend, gaining continued investors’ confidence and demonstrating its ability to deliver strong earnings growth and cash flows. We note that the company has raised dividend about 10 times since January 2006, reflecting a 71% increase in that period. Going forward, ONEOK anticipates growing dividend by about 50%-60% between 2011 and 2013.
The present dividend yield of the company is 3.9%, higher than the industry level of 3.2% as well as its nearest peer, OGE Energy Corp. (OGE), with a dividend yield of 3.36%.
Separately, ONEOK’s board of directors also authorized a new buyback program, allowing buying back roughly $750 million worth of the company’s outstanding shares. The buyback program extends for a period of three years. The authorization limits the buybacks to not more than $300 million in any one calendar year.
Management indicated that the program will cease upon completion of the repurchase of $750 million shares or on December 31, 2013, whichever is earlier.
ONEOK said purchases will be funded by its available cash, free cash flow and short-term borrowings. Earlier, the company completed a 7.5 million share buyback program in June 2007, which was authorized in May 2007.
ONEOK’s financial position remains solid with the structure and flexibility to fund growth, either organically or inorganically. The strong cash flow generation at the company’s three operating segments enables flexibility and investment options.
ONEOK ended the second quarter with $100 million of cash, $1.2 billion of available credit facility, debt-to-equity at 39%, and no outstanding short-term debt. Furthermore, the company has no scheduled debt maturing until 2011.
Altogether, ONEOK’s strong cash position, solid financial performance and continued growth through ownership in ONEOK Partners L.P. (OKS) provides the company with ample financial flexibility to deliver additional value to shareholders in the form of share repurchases and dividend payouts.
Based in Tulsa, Oklahoma, ONEOK Inc. is a diversified energy company, operating as a natural gas distributor primarily in the United States. We maintain our long term Neutral recommendation on ONEOK shares, supported by the company’s short term Zacks #3 Rank (Hold).
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