We issued an updated research report on ONEOK Inc. OKE on Apr 13, 2015. The company’s favorable cash generating capacity and ongoing investments in growth projects will likely drive its performance in the future. In addition, its practice of paying regular dividends is commendable. However, stringent regulations coupled with dependence on the local distribution companies for supplying energy services remain potential setbacks.

This Zacks Rank #3 (Hold) stock maintains a stable cash generating capacity through operating activities. In 2014, the company’s operating cash flow stood at around $1.29 billion. A stable cash inflow supports the company’s multiple infrastructure development projects.

ONEOK Inc. continues to expand its scale of operations primarily in the mineral-rich areas of the Bakken Shale, Permian Basin and other areas through its unit, ONEOK Partners, L.P. OKS. In 2014, the company spent $1.78 billion as capital expenditure.

Consistent investments in growth projects will help ONEOK Partners to serve more upstream players, and subsequently provide higher distribution to ONEOK Inc., going forward. In 2015, the company expects to obtain distribution worth $694 million from ONEOK Partners.

The company’s steady cash generating capacity also allows it to pay dividends at regular intervals. In 2014, it distributed $443.8 million as dividend, up an impressive 45.6% year over year. This initiative will enable the company to retain investor interest in the stock.

However, ONEOK Inc.’s operations are subject to strict government regulations. The company’s profitability primarily depends on its ability to escalate costs related to offering energy and other commodities to customers by attaining necessary regulatory approvals. Moreover, ONEOK Inc. expects to incur significant costs of compliance in the future.

Key Picks from the Sector

Some better-ranked stocks in the sector include Atmos Energy Corporation ATO and Chesapeake Utilities Corporation CPK, each carrying a Zacks Rank #2 (Buy).