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ONEOK Inc. (OKE - Analyst Report) received a positive reaction from the market as it came out with strong earnings guidance for 2014. Shares gained 3.9% in a day to close at $59.51.

ONEOK’s net income in 2014 is expected to be $285 million, up 9.5% from $260 million guided for 2013 while operating income is expected to increase 24.5% to $1,160 million from 2013 guidance of $932 million.

The favorable 2014 guidance takes into account strong fundamentals at its subsidiary, ONEOK Partners, L.P. (OKS - Analyst Report). ONEOK Partners’ performance is expected to improve due to an increase in natural gas gathering and processing volumes, and higher natural gas liquids (“NGL”) gathering volumes as a result of the completion of numerous projects.

ONEOK plans to increase the 2014 annual dividend by 53% to $2.33 per share from $1.52 per share in 2013, subject to the board’s approval. The company is expected to allocate $560 - $640 million for 2014 dividend payouts.

The company expects to increase the average annual dividend in the range of 20% - 25% between 2013 and 2016. We believe the upward revision in dividend is also instrumental in driving the share price.

We believe ONEOK’s well-diversified properties, strategic investment program, scheduled completion of growth projects and a steady project pipeline will likely boost its performance going forward.

The company plans to invest $2,268 million in 2014. ONEOK intends to allocate the majority of it to several projects under ONEOK Partners’ portfolio. Currently, the partnership is in the middle of several important projects and intends to start a couple more, including a venture in Williston Basin, in the near term. These projects will enable ONEOK to serve more customers in the future.

ONEOK currently has a Zacks Rank #3 (Hold). The stocks from the sector that are presently performing well include AGL Resources Inc. (GAS - Analyst Report) and Crosstex Energy LP , each with a Zacks Rank #2 (Buy).

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