Expansion and Growth of Oneok’s Natural Gas Business
ONEOK (NYSE: OKE) is a leading vertically integrated natural gas liquids corporation that has stood the test of time and continued to provide shareholders with 25 years of dividend stability They have applied vertical integration and strong core fundamentals to their business model by utilizing gathering, processing, and transporting natural gas liquids to their clients.
They provide these services while also operating in a safe and environmentally friendly manner as they conduct their business further in a world transitioning to renewable sources of energy.
This is why they use efficient technologies to reduce their carbon impact over time.
ONEOK has a variety of recent projects such as their Elk Creek pipeline which was constructed to transport natural gas from eastern Montana to their Mid-continental natural gas facility in Bushton, Kansas. This was completed in December of 2019.
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A more recent project is the Bear Creek facility that will process natural gas in Dunn County, North Dakota. This processing facility’s capacity will provide 1.6 billion cubic feet of natural gas per day once fully complete.
These projects have continued to bring more revenues into ONEOK’s business, allowing shareholders and dividends to increase over time. This shows that there is still lots of growth ahead as they acquire more future projects.
Fee Based Commitments
ONEOK has placed itself in the position to take advantage of its long-term fee-based commitments from the natural gas gathering and providing operations to maintain consistent income.
In 2020, ONEOK reported that 90% of their earnings as fee-based. Another compelling fundamental on ONEOK’s balance sheet is that no single customer provides more than 10% of total revenues. This allows them to consistently grow at a sustainable rate as it adds diversity to their income portfolio.
Past Performance and Fundamentals
ONEOK has been growing its infrastructure for quite some time, this has benefited them greatly as they have built sizable projects throughout each milestone. Although, they do not own the land on which their pipelines are located, which may add fees later on if environmental regulators decide on new laws or regulations involving natural gas transportation.
Despite the difficult economic climate throughout 2020, ONEOK has begun to significantly recover as they have shown growth in their recent quarters of returning revenues.
Time will tell if ONEOK’s fundamentals continue to improve. As of right now, there looks to be no potential force preventing continued revenue growth from occurring.
An Income Asset
ONEOK has a quarterly dividend of $0.935 making this an incredible income-producing asset for many investor’s portfolios. This dividend has been increased over the last 25 years showing the strength and stability ONEOK brings their shareholders through hard-to-navigate economic impacts.
They are striving to maintain and grow their dividend over time as they acquire more business around North America. This is great to see if you’re a shareholder because your passive dividend income can be either reinvested or used for day-to-day expenses.
What Happens Next
Although the future may be at times unpredictable, ONEOK’s growth and dividend history is not. In fact, it’s shown predictability and productivity across their entire vertically integrated income-producing business model.
ONEOK can potentially make a great addition to a passive-income portfolio, especially if they continue to improve and catch up to where they previously were in 2020.
Overall, ONEOK has shown incredible strength and resilience as they continue to expand and grow their natural gas processing and transporting segments. It’s important to remain cautious since environmental regulation can impact ONEOK greatly at any moment. However, they have been very selective and generous with the methods they choose for operations which may work in their favor over the long term.
ONEOK is an excellent income play for investors looking to add some stable cash flow to their portfolio. From its pandemic lows of $20.67 it has rallied strong and there is more room left to grow to reach its pre-pandemic highs. As always do your own due diligence and invest based upon your own risk appetite and consult your own financial advisor for the right investment strategy for your specific needs.
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