Tickers in this Article: OKE, OKS, GPN, WWW, AGL
Oneok (NYSE:OKE) is a diversified energy company with assets and operations in distribution and energy marketing. The company also gets a large part of its income and growth from its ownership and role as the general partner of Oneok Partners, a company tied into growth from the development of domestic unconventional resource basins. IN PICTURES: 4 Biggest Investor Errors

Oneok Partners
Oneok is the general partner and 42.8% owner of Oneok Partners (NYSE:OKS), an energy company that owns assets in the natural gas and natural gas liquids processing, storage and transportation areas. Oneok received $304 million in distributions from Oneok Partners in 2010, more than double the $145 million received in 2006. Oneok Partners is planning $1.3 billion in growth projects over the next three years in the Williston Basin, and other areas to handle increases in development.

Distribution Business
Oneok is one of the largest distributors of natural gas in the United States, and serves 2 million customers in Oklahoma, Texas and Kansas. Oneok has doubled its operating income from this segment over the last five years, going from $117 million in 2006 to $226 million in 2010.

Oneok is allowed a return on equity of 10.7% in this business and does not have a significant rate filing with the regulatory authorities until December 2013.

Energy Services
The energy services business provides natural gas and other services to utilities and other customers. Oneok Partners expects the energy services segment to have operating income of approximately $126 million in 2010.

Financial Goals
Oneok has set a goal of 8% to 10% annual growth in net income over the next three years, leading to free cash flow of $150 million to $200 million each year through 2013. This growth will be driven mostly by contributions from its share ownership of Oneok Partners and its general partner payments.

Oneok also plans to grow its dividend by 50% to 60% over the next three years, and will be comfortable as long as the company can keep its payout ratio between 60% and 70% of earnings. Oneok has a current yield of 3.8%. Still, other gas utilities have higher yields. AGL Resources (NYSE:AGL), for example, distributes natural gas in the southern United States and has a yield of 4.5%.

Oneok recently raised the lower end of its guidance on net income for 2010 to between $320 and $335 million. This increase came from all three business areas. Many companies have been adjusting guidance recently. Wolverine World Wide (NYSE:WWW) increased its guidance, while Global Payments (NYSE:GPN) reaffirmed its earnings guidance at the current level. (For related reading, take a look at Can Earnings Guidance Accurately Predict The Future?)

The Bottom Line
Oneok has a variety of regulated and non-regulated businesses, and gets a large chunk of its growth and cash flow from its interests in Oneok Partners. The company also pays a nice dividend and plans to increase that quickly over the next three years.

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