Trending: Dakota Access Pipeline Shutdown Order Weighs on Energy Transfer and Oneok
Iuri Struta Jul 16, 2020
Dividend.com analyzes the search patterns of our visitors each week. By sharing these trends with our readers, we hope to provide insights into what the financial world is concerned about and how to position your portfolio.
A judge ordering the temporary closure of the controversial Dakota Access Pipeline has been on our readers’ minds over the past week. Indeed, Oneok Energy and Energy Transfer, two companies affected by the order, top the list this week. Cigarette-maker Philip Morris International is third in the list after the U.S. Food and Drug Administration approved IQOS as a healthier alternative to smoking. Fourth in the list is telecommunications company Verizon.
Don’t forget to read our previous edition of trends here.
Oneok (OKE) has seen its traffic surge 85% these past two weeks, as the company has suffered from lower oil prices and a recent court order to shut down Dakota Access Pipeline.
Oneok is a midstream energy services provider that saw its stock plunge 20% over the past month and 64% year-to-date. Oneok was hit by two shocks in a span of just four months. The first shock occurred in April when the COVID-19 pandemic forced its clients to reduce production, meaning lower volumes of natural gas and oil flowed through its pipelines.
The second shock happened about a week ago when Judge James Boasberg ordered a shutdown of Dakota Access Pipeline due to environmental concerns and asked it to be drained by August 5. Oneok does not directly own Dakota Access but its closure means producers in the region will not be able to ship enough oil to Oneok via Dakota Access and might be forced to cut production. This means even lower volumes processed by Oneok pipelines.
Despite the turmoil experienced by Oneok, the company maintained its dividend in May at $0.935 per share, which represents a yield of nearly 14%. However, there are fears the company will be forced to cut its dividend soon.
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Energy Transfer (ET) has made it to the top four most popular companies for two consecutive fortnights. The pipeline operator has seen its viewership rise 48%, as the firm made headlines after it disobeyed a court order to empty its North Dakota Access pipeline. Last week, Energy Transfer said it would not be shutting the line because of its belief the judge overstepped his authority when issuing the order. The company made clear, however, that it was not ignoring the court’s order but rather wanted more time to appeal the decision.
Shares in Energy Transfer failed to post a strong recovery after it said oil will continue to flow through the pipeline, a sign investors believe the company will eventually cave in. However, the company’s strategy revolves around optimism that it will be victorious on appeal.
Energy Transfer’s dividend also remained untouched in May at a quarterly $0.305 per share. This represents an annual yield of nearly 19%, which could be unsustainable if the current debacle continues.
Philip Morris International
Philip Morris International (PM) has seen its viewership increase by 42% over the past two weeks, partly due to good news received by the cigarette maker in the U.S. Last week, the Food and Drug Administration (FDA) authorized Philp Morris’ tobacco heating system, marketed as IQOS, as a ‘modified risk’ product. As such, the company can now market the products as containing a reduced level of damaging substances that will lead to an improvement in the population’s health.
The IQOS, which has been selling internationally, heats tobacco rather than burning it and as such contains a lower level of chemicals. The FDA, however, noted that the IQOS is not risk free as it contains nicotine, which is ‘addictive.’
Shares in Philip Morris have risen more than 5% this month, cutting year-to-date losses to 13%. With its $4.68 annual dividend payout, Philip Morris yields 6.4%.
Check out our latest Best Dividend Stocks List here.
Telecommunications giant Verizon (VZ) is last in the list with a 40% advance in viewership. Verizon has made good progress in rolling out the 5G technology in the U.S. and it expects full commercialization in 2021. In this area, Verizon is clearly ahead of its arch-rival AT&T, with its 5G network showing the best performance by far, according to a report by Ookla.
Verizon shares have lost 10% since the start of the year, beating AT&T, which shed 23% of its value. The company suffered from the COVID-19 pandemic as it was forced to close stores and device sales dropped. As such, the firm pulled its full-year earnings-per-share growth guidance from 2%-4% to 2%. It also said it expects headwinds to continue in the second quarter.
Verizon pays an annual dividend of $2.46 per share, which yields 4.5%. Its payout ratio is around 52%.
The Bottom Line
Oneok and Energy Transfer have seen their share prices decline after a judge ordered the shutdown of the controversial Dakota Access Pipeline, which has stirred protests over environmental concerns. Philip Morris International received a piece of good news after its tobacco heating system was authorized as a minimized risk product. Telecom giant Verizon has performed relatively well thanks to its leadership in the 5G race.
Be sure to check out Dividend.com’s News section for next week’s Market Wrap and other great dividend investing news.
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