Yahoo Finance ONE Gas (OGS) Increases Dividend, Narrows 2022 Guidance
ONE Gas OGS announced that its board of directors approved a 4.8% increase in its quarterly dividend to 65 cents per share. The dividend is payable on Mar 10, 2023, to shareholders of record at the close of business on Feb 24, 2023.
ONE Gas management has been raising its quarterly dividend on a yearly basis. The current dividend of 65 cents indicates growth of 132.1% from 28 cents paid out in the second quarter of 2014.
The increase of dividend resulted in an annualized dividend of $2.60 per share, marking a 4.8% rise from the prior year's $2.48 per share. Through 2027, the company expects an average annual dividend increase of 4-6%, with target dividend payout ratio of 55-65% of net income, based on its board of directors’ approval. The company’s current dividend yield is 3.13%
Can ONE Gas Sustain Dividend Hikes?
The company aims to invest $3.6 billion in 2023-2027 to strengthen its operations. Nearly 70% of the planned capital expenditure will be directed toward system integrity and replacement projects. Regular investment in a fully regulated company and its ability to generate sufficient cash flows will support management’s plans of rewarding shareholders.
This 100% regulated natural gas distribution utility has a high percentage of residential customers, providing stability and strong visibility of future earnings. It has been steadily increasing its customer base every year since 2015 and expects average annual customer growth of 1% for 2023-2027 across its service territories.
The company’s stable growth and sufficient cash flows indicate that it will be able to sustain its shareholder-friendly moves in the future.
Narrowing Financial Guidance
ONE Gas has also narrowed its 2022 financial guidance. Its net income guidance is pegged at $221-$223 million, down from the previously mentioned $224-$238 million. Its earnings guidance is pegged at $4.06-$4.10 per diluted share compared with the previously stated $4-$4.16.
Capital investments for 2022 are expected to be $655 million. ONE Gas utilizes the fund toward pipeline integrity, extension of services to new areas, increase in system capacity, pipeline replacements, automated meter reading, government-mandated pipeline relocations, facilities, information technology assets, and cybersecurity.
Utilities’ Legacy of Dividend Payment
Companies involved in utility services generally have stable operations and earnings. Consistent performance and the ability to generate cash flows allow utilities to reward shareholders with regular dividends. Recently, WEC Energy Group WEC increased its quarterly dividend rate by 7.2%.
The Zacks Consensus Estimate for WEC Energy Group’s fourth-quarter earnings is pegged at 75 cents per share, implying a year-over-year increase of 5.63%. Its current dividend yield is 3.4%, better than the Zacks S&P 500 composite’s yield of 1.63%.
Price Performance
Over the last three months, the ONE Gas stock has returned 6.2%, underperforming the industry’s average of 6.3%.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
ONE Gas currently has a Zacks Rank #4 (Sell).
Some better-ranked stocks in the same sector are Consolidated Edison, Inc. ED and Atmos Energy ATO, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The current dividend yields of Consolidated Edison and Atmos Energy are 3.4% and 2.6%, respectively.
Consolidated Edison and Atmos Energy have an average earnings surprise of 9.06% and 4.87%, respectively, for the last four quarters.
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Consolidated Edison Inc (ED) : Free Stock Analysis Report
WEC Energy Group, Inc. (WEC) : Free Stock Analysis Report
Atmos Energy Corporation (ATO) : Free Stock Analysis Report
ONE Gas, Inc. (OGS) : Free Stock Analysis Report
