Master limited partner (MLP), ONEOK Partners L.P. (OKS) hiked its third quarter cash distribution by 1 cent to $1.13 per limited partner unit, implying a 0.9% rise from the previous distribution of $1.12 per unit. This brings the partnership’s annualized distribution to $4.52 per unit.
The distribution will be paid on November 12, 2010 to unit holders of record as of October 29, 2010.
The distribution increase reflects growing fee-based earnings as a result of the partnership’s investments in new growth projects. These investments have enabled the partnership to expand its operating footprint, meet customer demands and at the same time enhance unitholder value by increasing returns.
ONEOK Partners expects similar distribution increases in 2010, given the ramp-up of production at various projects. ONEOK Partners’ distribution increase is consistent with the partnership’s goal to increase distribution by one cent per quarter in 2011 and between 5% to 10% annually in 2012 and 2013.
Also, ONEOK Partners’ annualized dividend yield of 5.76% is higher than its peers, El Paso Corporation (EP) and Inergy Holdings L.P. (KMP), with respective dividend yields of 0.3% and 4.47%.
The partnership has been consistent with distribution increases since April 2006, increasing distributions to unit holders by 41% to date.
We believe ONEOK Partners’ balance sheet strength, ample liquidity and investment-grade credit ratings along with a solid cash position, strongly support its rising cash distributions. The partnership ended the June quarter with cash and cash equivalents of $3.1 million and $690 million available under its $1.0 billion credit facility. Cash flows last quarter were also strong at $132.7 million.
ONEOK Partners’ credit ratings as provided by Moody’s and S&P were Baa2 and BBB, respectively, both with stable outlooks.
ONEOK Partners is expected to release its third quarter 2010 financial results on November 2, 2010. The Zacks Consensus earnings estimate for the third quarter of 2010 is 95 cents per unit. For the full year 2010 and 2011, the Zacks Consensus earnings estimates are $3.33 and $3.91 per unit, respectively.
Tulsa, Oklahoma-based ONEOK Partners L.P. is one of the largest publicly traded master limited partnerships in the United States. It is a leader in the gathering, processing, storage and transportation of natural gas in the country. The partnership also operates major natural gas liquid (NGL) systems that connect NGL suppliers in the Mid-Continent and Rocky Mountain regions with key market centers.
We retain our Neutral recommendation on ONEOK Partners, which is supported by a short term Zacks #3 Rank (Hold).
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