ONE Gas OGS announced that its board of directors has increased dividends by 1%. The new quarterly dividend will be 67 cents per share compared with the previous quarter’s 66 cents. The new dividend will be payable on March 7, 2025, to stockholders of record as of Feb. 21, 2025.

The company expects an average annual dividend increase of 1-2% through 2029, with a target dividend payout ratio of nearly 55-65% of net income, subject to approval by the board of directors. The increased dividend rate resulted in an annualized dividend of $2.68 per share compared with the previous level of $2.64. The current dividend yield is 3.76%, higher than the Zacks S&P 500 composite's average of 1.19%.

Can ONE Gas Sustain Dividend Hikes?

The company also expects capital expenditures to be $4.25 billion through 2028. Nearly $3 billion of the planned capital expenditure will be directed toward system integrity and replacement projects.

This 100% regulated natural gas distribution utility has a high percentage of residential customers, providing stability and strong visibility of future earnings. More than 92% of OGS’ customers belong to the residential category. The company was able to register higher customer additions and is expected to continue to do so over the long term, courtesy of improving economic conditions in its service territories.

OGS’ 2024 total capital investments include nearly $170 million for customer growth. The company has been steadily increasing its customer base every year since 2015 and expects an average annual customer growth of 0.9% for 2024-2028 across its service territories.

New rates implemented in Oklahoma, Kansas and Texas are expected to boost its annual revenues. Pending rate cases, once approved, should further boost its top line. Systematic expenditure and rate approval from the commission should allow ONE Gas to continue with its infrastructure-strengthening initiatives.

OGS’ growth prospects and ability to further enhance its performance indicate that management will have enough funds to sustain its shareholder-friendly initiatives in the future.

Utilities’ Legacy of Dividend Payment

Companies involved in utility services generally have stable operations and earnings. Consistent performance, regulated returns and the ability to generate cash flows allow utilities to reward shareholders with regular dividends.

In the past few months, WEC Energy Group WEC, The York Water Company YORW and Global Water Resources GWRS have raised their quarterly dividend rate by 6.9%, 4% and 1%, respectively.

The Zacks Consensus Estimate for WEC Energy’s 2024 sales indicates an improvement of 1% from the previous year’s level. WEC’s current dividend yield is 3.42%.

The Zacks Consensus Estimate for York Water’s 2024 sales implies an improvement of 5.6% from the previous year’s level. YORW’s current dividend yield is 2.92%.

The Zacks Consensus Estimate for Global Water Resources’ 2024 earnings per share implies an improvement of 7.7% from the previous year’s level. ETR’s current dividend yield is 2.57%.

OGS’ Stock Price Performance

In the past month, shares of ONE Gas have risen 1.4% compared with the industry’s growth of 3.9%. 

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OGS’s Zacks Rank

The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
 

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WEC Energy Group, Inc. (WEC) : Free Stock Analysis Report

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