ONEOK's (NYSE:OKE) Dividend Will Be Increased To $1.03

ONEOK, Inc.'s (NYSE:OKE) periodic dividend will be increasing on the 14th of February to $1.03, with investors receiving 4.0% more than last year's $0.99. The payment will take the dividend yield to 3.8%, which is in line with the average for the industry.

Check out our latest analysis for ONEOK

ONEOK's Future Dividend Projections Appear Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, ONEOK's was paying out quite a large proportion of earnings and 85% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but we don't think that there are necessarily signs that the dividend might be unsustainable.

Looking forward, earnings per share is forecast to rise by 47.7% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 60% which would be quite comfortable going to take the dividend forward.

ONEOK Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the dividend has gone from $2.24 total annually to $3.96. This implies that the company grew its distributions at a yearly rate of about 5.9% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

We Could See ONEOK's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. ONEOK has impressed us by growing EPS at 9.6% per year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

Our Thoughts On ONEOK's Dividend

In summary, while it's always good to see the dividend being raised, we don't think ONEOK's payments are rock solid. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for ONEOK that you should be aware of before investing. Is ONEOK not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.