Investment

This Dividend Stock Offers a Unique Investment Opportunity in the S&P 500

Published

2 years ago

January 3, 2023

Hundreds of companies pay dividends to their investors. Because of that, it can be hard to know which one to pick if you’re looking to keep your portfolio holdings manageable.

One dividend stock that stands out from the crowded field is Oneok (OKE -1.03%). The pipeline company offers a unique investment opportunity among S&P 500 members. Here’s what makes it so distinct.

In a class of its own

Oneok stands out among stocks in the S&P 500:

Image source: Oneok Investors Relations Presentation.

There are around 500 companies in the S&P 500. However, only 380 have investment-grade credit ratings. That means they have the financial strength to weather an economic downturn. This characteristic could be important in 2023 if there’s a recession.

Meanwhile, only 269 of those companies have large market caps of over $20 billion. Larger companies are more mature and stable, making them good portfolio anchors.

From that group, only 176 have high environmental, social, and governance (ESG) ratings of A or better from MSCI. In Oneok’s case, it’s an ESG leader with a AAA rating thanks to its strong corporate governance, lower carbon emissions, and health and safety standards. While it might seem strange to see a fossil fuel-focused company with such high environmental ratings, Oneok has helped lead the industry’s efforts to reduce natural gas flaring in the Williston Basin by capturing this gas. It also provides the infrastructure to support renewable natural gas, helping prevent those methane emissions. Finally, the company aims to reduce its emissions by 30% by 2030. Because of that, it’s making the energy sector much more sustainable.

From that group of sustainable, large-cap, investment-grade-rated companies, only 135 are on pace to grow their earnings per share by a 5% or greater rate over the next couple of years.

Finally, Oneok is the only company of that remaining group with a high-yielding dividend that it has never reduced. That track record of dividend stability is impressive, considering that many energy stocks have reduced their payouts in the past due to the sector’s volatility.

An attractive dividend

Oneok has done more than maintain its dividend over the years. The pipeline company has steadily increased it over time. While it hasn’t grown its payout every year, it has expanded it at a 13% compound rate since 2000.

The company should have the fuel to continue growing its dividend in the future. Its earnings continue to rise as it benefits from the $5 billion of expansion projects it completed in the recent past, setting it up to grow volumes and benefit from favorable commodity prices. Its earnings per share have increased by 13% over the past year. Meanwhile, the company expects its income to grow by more than 10% in 2023. Those rising earnings will supply Oneok with more money to sustain its dividend.

Further, as noted, the company has an investment-grade balance sheet. Leverage was a comfortable 3.8 times at the end of the third quarter, giving Oneok the financial capacity to invest in new expansion projects as opportunities arise while also continuing to pay its attractive dividend. The company funded nearly $900 million of capital projects through the third quarter to maintain and expand its energy infrastructure network.

Meanwhile, Oneok continues to seek new growth drivers that could give it the fuel to keep growing. For example, the company recently filed for a permit to build the Saguaro Connector Pipeline that would transport gas to the Mexican border for delivery to an export facility on that country’s west coast. The company hopes to make a final investment decision on the project by the middle of 2023. Oneok has an excellent track record of completing expansion projects that help sustain and grow its dividend.

A unique dividend stock

Oneok stands out among dividend stocks. It offers investors a unique blend of safety, size, sustainability, growth, and income. That compelling blend of features makes it a high-quality dividend stock that could anchor any income portfolio.

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Investment

Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

Published

7 days ago

November 6, 2024

Anne Joseph

NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

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Investment

S&P/TSX composite up more than 100 points, U.S. stock markets mixed

Published

4 weeks ago

October 16, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

S&P/TSX up more than 200 points, U.S. markets also higher

Published

1 month ago

October 11, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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