ONEOK is an attractive dividend stock but it is overpriced

0
By:

Motiur Rahman

on
May 28, 2022

ONEOK is trading at a valuation of $66.

The price is at a PE of 16.93 and Peg of 2.02 indicating overpricing.

While the dividend yield of 5.66% is attractive, investors can sell now to buy later when the price is lower.

ONEOK Inc. (NYSE:OKE) has a dividend yield of 5.66%. This yield is among the highest in the market. Consequently, investors interested in regular cash dividends would consider the stock favorably. A price assessment, however, shows that investors need to be careful.

ONEOK is a gas company. The recent rise in energy prices is a great boost for the company. At a price of $66.03, the stock is within reach of many investors. These are investors who would have wanted to take advantage of the rising prices for energy stocks. The valuation of ONEOK rose faster than many stocks. It is now fully valued. The only way for the stock is down.


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The EPS of ONEOK is at $3.35, with an expected growth of 8.37%. The growth in EPS is significantly slower than many energy stocks at the moment. At the price of $66, the PE is 16.93, while many large energy stocks are at 10. The PEG ratio is 2.02 when the preferred PE is below 1.0. These metrics show that the stock is trading at prices too high compared to earnings and growth.

Other metrics reinforce the view that ONEOK is potentially overpriced, including the ROA at 6.38%. Also, there is the return on invested capital, which is at 7.79%. The ROE of 24.89% is the only metric that would make the investors consider the stock. Still, there is a need to be cautious.

ONEOK has been declining as energy stocks gain

Source – TradingView

ONEOK hit a 52-week high of $75 in March. Since then, the stock has been declining. It has therefore been moving against other energy stocks in the market. The analysis shows that ONEOK is correcting after the stock hit a high faster than peers.

Summary

ONEOK is a recommended sell. The stock is overpriced by the market and is set for a correction. Dividend investors could sell now and wait to buy back the stock at lower levels.

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