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ONE Gas (OGS) Rewards Shareholders With 6.9% Dividend Hike

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ONE Gas, Inc. (OGS - Free Report) announced that the board of directors has approved a 6.9% increase in the quarterly dividend rate. The revised quarterly dividend will be 62 cents, bringing the new annualized dividend rate to $2.48 from $2.32. The dividend is payable Mar 11, 2022, to its shareholders of record on Feb 25, 2022.

The current dividend yield is 2.89%, better than the Zacks S&P 500 composite’s 1.33%. Management has been annually raising the dividend rate over the past few years. The new dividend has marked a 65.7% total increase in quarterly dividend since 2016.

For the long term, management aims at upwardly revising the dividend rate in the range of 6-8%, subject to the board of directors’ approval. This would keep ONE Gas’ dividend in the targeted payout ratio between 55% and 65%.

Can ONE Gas Sustain Dividend Hikes?

ONE Gas’ 100% regulated natural gas distribution operations will assist it to generate stable cash flow over the long term. The expanding customer base and large percentage of residential customers ensure stability in its earnings stream. New gas rates effective in Oklahoma, Kansas and Texas will continue to boost annual revenues of OGS.

It projects capital expenditure to be $3.5 billion in the 2022-2026 time period. The ongoing capital expenditures are directed 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. This will allow OGS to meet demand of the expanding customer base and boost the top line. Ongoing increase in the customer base and its steady performance pave the way for further increase in the annual dividend rate.

Peer Moves

Spire Inc. (SR - Free Report) has been paying out dividends consistently since 1946. SR raised the annual dividend for fiscal 2022, marking the 19th consecutive year of increase. Its new annualized dividend is $2.74 per share. Also, Spire’s net cash provided by operating activities in fiscal 2021 was $249.8 million. Strong cash flows allow the utility to distribute dividends and increase the rate annually. Its dividend hike is in line with its target payout ratio of 55-65%. Currently, its dividend yield is 4.11%.

MDU Resources (MDU - Free Report) has been paying out dividend for the past 83 consecutive years. MDU raised its annual dividend in November 2021, marking the 31st consecutive year of increase. Its new annualized dividend is 87 cents per share. MDU’s net cash provided by operating activities in the first three quarters of 2021 was $365.8 million compared with $481.7 million in the comparable period of 2020. Such strong cash flows allow it to distribute dividends and increase the rate annually. Currently, its dividend yield is 2.87%.

Consistent performance of UGI Corp. (UGI - Free Report) enabled it to reward its shareholders through annual dividend rate hikes and share repurchases. In May 2021, UGI Corp.’s board of directors approved a hike in itsquarterly dividend rate to 34.5 cents per share or $1.38 on an annual basis, up 4.5% from the previous quarterly rate of 33 cents. This marks the 137th consecutive year of dividend payment and 34th straight year of annual dividend raise. Also, this hike is inline with UGI’s target to increase dividend by 4% in the long term. Its current dividend yield is 2.98%.

Zacks Rank & Price Performance

ONE Gas currently has a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past three months, ONE Gas’ shares have gained 18%, outperforming the industry’s rally of 2.7%.

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ONE Gas, Inc. (OGS) - free report >>