Good value continues to be hard to find in the markets, and as a result I have been staying away from most “traditionally” held dividend growth stocks. As such, I took an opportunity to pick up some additional shares in ONEOK Partners LP (OKS) whom I see to have great value and strong dividend growth potential.
With that, this past Thursday, I purchased 36 shares of OKS for a total cost including commission of $1,998.99. This purchase increases my projected forward 12-month dividends by $102.96 and gives me a yield on cost (YOC) of 5.23% for my entire OKS position. My purchase went through in time for the new shares to be included with the April 26th ex-dividend date.
These additional dividends bring my projected forward 12-month dividends from $942.41 to $1,045.83, and my portfolio’s YOC from 5.88% to 5.80%. Pretty exciting that I have now broken the $1,000 mark in forward dividends! I am looking forward to growing this in the years to come. Included in this updated projection is the increase in dividend payment from $0.71 per share to $0.715 per share for OKS.
Naturally, because my timing sucks (although I am not attempting to be a market timer), OKS missed the mark on their quarterly earnings report a couple of days after the purchase, which has since dropped the share price by over 10%. While the loss of value is frustrating, I believe that over the long-term OKS will outperform as a dividend growth stock.
Because OKS is a master limited partnership (MLP), I have made this purchase in a taxable brokerage account. This allows me to maximize the benefits of a MLP by filing my portion of the net income/profits on my personal return, deferring a significant portion of the income generated by my investment. With MLPs, dividend payments are considered a return of capital as opposed to traditional dividends, thus subjecting them to different tax treatment. A nice Motley Fool summary on MLPs, their structure, and taxability, can be found here.
A quick OKS business summary from Bloomberg:
“ONEOK Partners, L.P., through a subsidiary limited partnership, owns a general partner interest in a master limited partnership. The partnership owns an interstate pipeline system that transports natural gas primarily in the upper Midwest and Mid Continent regions of the United States.”
Dividend Monk recently wrote up a great analysis on OKS which can be found here.
I have updated my Equity Investments page with this transaction.
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Congrats on crossing the $1k mark. That’s a huge milestone for any DG ivnestor. And that’s a mighty high YOC for your portfolio. Are you reinvesting dividends back into the paying company? If so just watch out for potential overweighting for those high-yielders.
Thanks JC! Definitely a high yield portfolio right now (PSEC, I’m looking at you!) but that has been coming down and will be coming down some more as I continue to add holdings. My plan is to hold PSEC for the next year or two and divest a piece of it into a more traditional DG holding.
As an aside, I am fortunate that my DG portfolio is just a piece of my overall investment strategy, and one that I am looking to track here at WYOR. I am definitely looking to grow this into a more traditional DG portfolio over the next five years or so. Based on my current plan I should be able to aggressively start contributing to this portfolio beginning in 2014.