Friday, February 8, 2013

ONEOK Partners Stock Analysis


ONEOK Partners, L.P. (OKS) engages in the gathering, processing, storage, and transportation of natural gas in the United States. The partnership has paid distributions since 1994, and increased them every year since 2006.

ONEOK Partners is a master limited partnership (MLP), which is a pass through corporate structure. As such, profits are not taxed at the entity level, but at the individual partner level. Investors in MLPs are called limited partners, shares are called units and dividends are called distributions. As a result of the fact that the net results are taxed at the individual partner level, the taxation of these distributions could be slightly more challenging when compared to taxation of dividends from typical dividend stocks such as Chevron (CVX) for example. ONEOK (OKE) is the general partner and owner of 43.40% in ONEOK Partners (OKS).


I replaced my investment in ONEOK Inc (OKE) for ONEOK Partners (OKS) units in 2011. In 2012 I sold the majority of my shares in Con Edison (ED) and bought more units of ONEOK Partners with the proceeds. You can read my arguments behind the trade in this article.

Since 2005, ONEOK Partners has managed to boost distributions by 7.10% per year. Per its partnership agreement, the majority of available cash from operations should be distributed to general and limited partners.


Currently, ONEOK Partners yields 4.80%, which is somewhat lower in comparison with other MLPs. However, the strong distribution growth more than compensates for low current yield. I would consider adding to my position subject to availability of funds.

Full Disclosure: Long OKS and CVX

Relevant Articles:

Master Limited Partnerships (MLPs) – an island of opportunity for dividend investors
General vs Limited Partners in MLP's
Why I am replacing ConEdison (ED) with ONEOK Partners
Master Limited Partnerships: The Perfect Dividend Stocks
ONEOK Inc (OKE) Dividend Stock Analysis

This article was written by Dividend Growth Investor. If you enjoyed this article, please subscribe to my feed [RSS], or have future articles emailed to you [Email] or follow me on Twitter [Twitter].

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