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

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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:

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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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Be cautious of financial advice on social media: Expert

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Li Zhang, the principal of corporate citizenship with Chartered Professional Accountants Canada (CPA), said in an interview with BNN Bloomberg Tuesday that it is very difficult to quantify the rise of financial advice on social media as there are so many different platforms and influencers.

However, Zhang said it is crucial to understand what credentials a financial influencer might have. She said it is important to understand if an influencer is qualified to provide financial advice and that people should understand how those dispensing advice get paid.

“All influencers have some way of deriving income from what they’re doing. So it’s super important to understand, especially when they’re finfluencers [financial influencers], how they’re being paid,” she said.

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“And then finally, if something feels too good to be true or it’s jumping on a trend, really ask yourself to get a second opinion.”

 

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Zacks Investment Ideas feature highlights: Alphabet, Tesla, Shopify, Amazon and Palo Alto

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For Immediate Release

Chicago, IL – February 2, 2023 – Today, Zacks Investment Ideas feature highlights Alphabet GOOGL, Tesla TSLA, Shopify SHOP, Amazon AMZN and Palo Alto Networks PANW.

Which of These Stocks Has Been the Best Buy, Post-Split?

Stock splits have been a regular occurrence in the market over the last several years, with many companies aiming to boost liquidity within shares and knock down barriers for potential investors.

Of course, it’s important to remember that a split doesn’t directly impact a company’s financial standing or performance.

In 2022, several companies performed splits, including Alphabet, Tesla, Shopify, Amazon and Palo Alto Networks. Below is a chart illustrating the performance of all five stocks over the last year, with the S&P 500 blended in as a benchmark.

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As we can see, PANW shares have been the best performers over the last year, the only to outperform the general market.

However, which has turned in a better performance post-split? Let’s take a closer look.

Tesla

We’re all familiar with Tesla, which has revolutionized the EV (electric vehicle) industry. It’s been one of the best-performing stocks over the last decade, quickly becoming a favorite among investors.

Earlier in June of 2022, the mega-popular EV manufacturer announced that its board approved a three-for-one stock split; shares began trading on a split-adjusted basis on August 25th, 2022.

Since the split, Tesla shares have lost roughly 40% in value, widely underperforming relative to the S&P 500.

Palo Alto Networks

Palo Alto Networks offers network security solutions to enterprises, service providers, and government entities worldwide.

PANW’s three-for-one stock split in mid-September seemingly flew under the radar. The company’s shares started trading on a split-adjusted basis on September 14th, 2022.

Following the split, PANW shares have struggled to gain traction, down roughly 15% compared to the S&P 500’s 3.3% gain.

Shopify

Shopify provides a multi-tenant, cloud-based, multi-channel e-commerce platform for small and medium-sized businesses.

SHOP shares started trading on a split-adjusted basis on June 29th, 2022; the company performed a 10-for-1 split.

Impressively, Shopify shares have soared for a 50% gain since the split, crushing the general market’s performance.

Alphabet

Alphabet has evolved from primarily being a search engine into a company with operations in cloud computing, ad-based video and music streaming, autonomous vehicles, and more.

Last February, the tech titan announced a 20-for-1 split, and investors cheered on the news – GOOGL shares climbed 7% the day following the announcement. Shares started trading on a split-adjusted basis on July 18th, 2022.

Alphabet shares have sailed through challenging waters since the split, down 10% and lagging behind the S&P 500.

Amazon

Amazon has evolved into an e-commerce giant with global operations. The company also enjoys a dominant position within the cloud computing space with its Amazon Web Services (AWS) operations.

AMZN’s 20-for-1 split was a bit of a surprise, as it was the company’s first split since 1999. Shares started trading on a split-adjusted basis on June 6th, 2022.

Following the split, Amazon shares have lost roughly 18% in value, well off the general market’s performance.

Bottom Line

Stock splits are typically exciting announcements that investors can receive, with companies aiming to boost liquidity within shares.

Interestingly enough, only Shopify shares reside in the green post-split of the five listed.

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Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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$13 million investment in Campbellford Memorial Hospital

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The Campbellford Memorial Hospital will be receiving a $13 million investment from the Ontario Government to address infrastructure concerns.

The announcement was made at the hospital by Northumberland—Peterborough South MPP David Piccini.

The $13 million is broken down as follows:

  • $9,639,900 will be going to CMH as one-time capital funding to address the HVAC and generator
  • $1,874,929 for reimbursement of CMH’s COVID-19-related capital expenses
  • $771,797 in COVID-19 incremental operating funding
  • up to $600,000 in one-time funding to support the hospital’s in-year financial and operating pressures
  • $163,600 in pandemic prevention and containment funding
  • $81,132 through the Health Infrastructure Renewal Fund
  • $46,884 in health human resources funding.

Interim President and CEO Eric Hanna welcomed the news, saying much needs to be done about the HVAC and generator.

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At the announcement, Hanna spoke of the issues with the generator.

“I’ve got the wee little generator up at the lake and then I’m thinking well, everything should be going well at the hospital,” Hanna told the audience in attendance.

“You get a call from the person in charge who says, ‘Guess what Eric? Generator didn’t start. Oh, so what does that mean? There’s no power in the hospital.’  That’s happened a couple of times in the past year and the generator is over 30 years old.”

Hanna says the solution was not as easy as replacing the generator.

“You can go buy the generator and that may be about a million dollars. But then when we found out afterwards, we came to hook up the new generator to the electrical distribution system and said it won’t work with that because your electrical distribution system is 1956. You can’t plug this generator into that. So now we’re putting close to $5 million into a whole electrical distribution system so the generator will work. It’s part of that ongoing thing and that’s why these costs continue to go up.”

The HVAC system was also something addressed by Hanna.

“It’s a contract close to $7 million to replace that. This wing, for example. There’s no fresh air in this wing. It hasn’t worked in here for 15 years. So now this is administrative areas and the concern was that in some of the patient carriers, it wasn’t working either.  So – having those discussions with David (Piccini) and saying what we have to do to correct this.”

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