Analyzing ONEOK (NYSE:OKE) & Tallgrass Energy GP (TEGP)

Tallgrass Energy GP (NYSE: TEGP) and ONEOK (NYSE:OKE) are both mid-cap energy companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, analyst recommendations, earnings, institutional ownership, valuation, profitability and risk.

Profitability

This table compares Tallgrass Energy GP and ONEOK’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Tallgrass Energy GP 97.10% 27.00% 15.89%
ONEOK 3.76% 9.25% 2.53%

Earnings and Valuation

This table compares Tallgrass Energy GP and ONEOK’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Tallgrass Energy GP $605.12 million 6.72 $26.79 million $0.80 32.31
ONEOK $8.92 billion 2.70 $352.03 million $1.60 36.67

ONEOK has higher revenue and earnings than Tallgrass Energy GP. Tallgrass Energy GP is trading at a lower price-to-earnings ratio than ONEOK, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Tallgrass Energy GP has a beta of 1.97, meaning that its stock price is 97% more volatile than the S&P 500. Comparatively, ONEOK has a beta of 1.26, meaning that its stock price is 26% more volatile than the S&P 500.

Insider & Institutional Ownership

36.3% of Tallgrass Energy GP shares are held by institutional investors. Comparatively, 69.9% of ONEOK shares are held by institutional investors. 1.0% of ONEOK shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Dividends

Tallgrass Energy GP pays an annual dividend of $1.42 per share and has a dividend yield of 5.5%. ONEOK pays an annual dividend of $2.98 per share and has a dividend yield of 5.1%. Tallgrass Energy GP pays out 177.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. ONEOK pays out 186.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Tallgrass Energy GP has raised its dividend for 15 consecutive years and ONEOK has raised its dividend for 2 consecutive years. Tallgrass Energy GP is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a breakdown of current recommendations for Tallgrass Energy GP and ONEOK, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Tallgrass Energy GP 1 4 4 0 2.33
ONEOK 0 8 7 0 2.47

Tallgrass Energy GP presently has a consensus price target of $30.00, suggesting a potential upside of 16.05%. ONEOK has a consensus price target of $58.50, suggesting a potential downside of 0.29%. Given Tallgrass Energy GP’s higher possible upside, analysts clearly believe Tallgrass Energy GP is more favorable than ONEOK.

Summary

Tallgrass Energy GP beats ONEOK on 9 of the 17 factors compared between the two stocks.

About Tallgrass Energy GP

Tallgrass Energy GP, LP is a limited partnership company, which includes the operations of Tallgrass Equity, LLC (Tallgrass Equity), Tallgrass MLP GP, LLC, Tallgrass Energy Partners, LP (TEP), and TEP’s subsidiaries. TEP owns, operates, acquires and develops midstream energy assets in North America. TEP’s segments include Crude Oil Transportation & Logistics, which is engaged in the ownership and operation of a crude oil pipeline system, and crude oil storage and terminaling facilities; Natural Gas Transportation & Logistics, which is engaged in the ownership and operation of interstate natural gas pipelines and integrated natural gas storage facilities; Processing & Logistics, which is engaged in the ownership and operation of natural gas processing, treating and fractionation facilities, and the provision of water business services to the oil and gas exploration and production industry, and Corporate and Other.

About ONEOK

ONEOK, Inc. is an energy midstream service provider in the United States. The Company owns and operates natural gas liquids (NGL) systems, and is engaged in the gathering, processing, storage and transportation of natural gas. THe Company’s operations include a 38,000-mile integrated network of NGL and natural gas pipelines, processing plants, fractionators and storage facilities in the Mid-Continent, Williston, Permian and Rocky Mountain regions. The Company operates through three business segments. The Natural Gas Gathering and Processing segment provides midstream services to contracted producers in North Dakota, Montana, Wyoming, Kansas and Oklahoma. The Natural Gas Liquids segment owns and operates facilities that gather, fractionate, treat and distribute NGLs and store NGL products primarily in the Mid-Continental, Permian Basin and the Rocky Mountain regions. The Natural Gas Pipelines segment provides transportation and storage services to end users.

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