Higher expected EBITDA
ONEOK (OKE) is scheduled to report its 3Q17 results on October 31, 2017. Analysts expect its 3Q17 EBITDA (earnings before interest, tax, depreciation, and amortization) to be $507 million—19% higher than its 3Q16 EBITDA of $428 million. The 3Q17 expected EBITDA is 10% higher than OKNEOK’s 2Q17 EBITDA.
The above graph shows the growth in ONEOK’s EBITDA over ten quarters and its estimated EBITDA for 3Q17.
ONEOK reported 11% EBITDA growth in 2Q17 due to higher natural gas and natural gas liquids volumes, higher fee rates in the natural gas gathering and processing segment, and higher transportation service fees. We’ll discuss ONEOK’s expected segmental performance later in this series.
On October 25, 2017, ONEOK declared a dividend of $0.745 per share—unchanged from the previous quarter. The company increased its 2Q17 dividends 21%, as the above graph shows. According to the company’s guidance for 2017, it expects annual dividend growth of 9%–11% after the increase in 2Q17.
Currently, ONEOK stock is trading at a yield of ~5.4%. It’s lower compared to ~6.7% for Enterprise Products Partners (EPD), while it’s higher than ~5.2% for Magellan Midstream Partners (MMP). In comparison, the SPDR S&P 500 ETF (SPY) (SPX-INDEX) yields nearly 2%. The energy sector forms nearly 6.0% of the S&P 500 Index.
Kinder Morgan’s (KMI) 3Q17 results met analysts’ expectations. To learn more, read Kinder Morgan’s 3Q17 Results Met Analysts’ Expectations. Both Enterprise Products Partners and Magellan Midstream Partners are scheduled to release their 3Q17 results on November 2, 2017.
In the next part, we’ll discuss ONEOK’s earnings per share estimates for 3Q17.