ONE Gas, Inc. Hikes Quarterly Dividend 9.5% (OGS)
By: Ned Piplovic,
ONE Gas, Inc. (NYSE:OGS) offers a 2.6% dividend yield and recently announced its annual dividend hike, which was 9.5% for the first quarter of 2018.
The company has advanced its annual dividend amount every year since it started dividend distributions four years ago. In addition to the rising dividend, the company rewarded its shareholders with a 9% share price growth and a double-digit-percentage total return over the past 12 months.
The company’s next ex-dividend date will occur on February 22, 2018, and the pay date will follow about two weeks later, on March 9, 2018.
ONE Gas Inc. (NYSE:OGS)
Headquartered in Tulsa, Oklahoma and founded in 1906, ONE Gas, Inc. operates as a regulated natural gas distribution utility company. Two if the company’s divisions — Oklahoma Natural Gas and Kansas Gas Service — are the largest gas utilities in their respective states, and the third division, Texas Gas Service, is the third-largest gas utility company in the state of Texas. Across all three states, the company serves more than 2 million customers, owns almost 45,000 miles of distribution mains and transmission pipelines and leases more than 50 billion cubic feet of natural gas storage capacity.
The company raised its quarterly dividend distribution 9.5% from $0.42 in the previous period to the current $0.46 payout. This current dividend amount is equivalent to a $1.84 annualized payout and a 2.6% forward yield. While the current yield is slightly below the simple average yield of all the companies in the Gas Utilities segment, it is 11% above the 2.38% average yield for the entire Utilities sector.
ONE Gas, Inc. has hiked its annual dividend every year since its started distributing dividends to its shareholders in 2014. Over the past four consecutive years, the company enhanced its annual dividend payout at an average rate of 13.2% per year, and it has advanced its total annual dividend amount 64% since 2014.
The company’s share price hit its 52-week low of $63.59 just a few days into the current trailing 12-month period, on February 9. 2017. After bottoming out at the beginning of February, the share price ascended 24.6% and reached its all-time high of $79.25 on November 30, 2017. Following the November peak, the share price reversed the 10-month-long trend and pulled back more than 12% by January 10, 2018.
It appears that the trend has reversed again, since the share price has been rising again slowly after January 10, 2018. The share price closed on February 1, 2018, at $69.46, which was 12.4% below the November peak, 9% higher than it was one year ago and almost 110% higher than it was in January 2014
The combination of rising dividend distributions and asset appreciation rewarded the company’s shareholders with a total return of almost 13% over the past 12 months, a total return of 71% over the past three years and a total return of 125% since the company started distributing dividends in early 2014. The company’s current dividend payout ratio of 52% indicates that ONE Gas should be able to continue supporting future dividend enhancements at current growth rates.
The company announced guidance for 2018 and five-year growth plans on January 17, 2018. For the upcoming year, the company anticipates an average rate base of $3.4 billion with a net income between $156 and $168 million, which converts to $2.96-$3.20 per diluted share. Additionally, the company allocated $375 million for capital expenditures in 2018.
The company plans to continue boosting its annual payouts at an average rate of 7% to 9% and targets a 55% to 65% dividend payout ratio for the upcoming five years. ONE Gas also increased its planned capital expenditures. The updated plan calls for annual capital expenditures to rise from $375 million in 2018 to $416 million in 2022, which is a 9.5% increase for 2022 versus the previous plan of $380 million for that year.
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