4 Reasons ONEOK, Inc. Is a Better Dividend Stock Than Targa Resources Corp.

4 Reasons ONEOK, Inc. Is a Better Dividend Stock Than Targa Resources Corp.

Income-hungry investors often focus too much attention on a company's current yield and not enough on its sustainability and growth potential. Because of that, most investors will take one look at Targa Resources' (NYSE: TRGP) 8.3% yield and automatically think it's a better dividend stock than ONEOK (NYSE: OKE) since it only currently yields 4.8%. Here are four reasons why that assumption couldn't be further from the truth.

After a recent equity offering to shore up its balance sheet and help finance growth capex, Targa Resources only expects its distribution coverage ratio to be between 0.95 times and 1.0 times this year. That's assuming commodity prices don't tank and its growth projects enter service on schedule. Not only is Targa's current coverage unsustainable over the long term, but it's well below the conservative 1.2 times dividend coverage that ONEOK expects this year, even after accounting for a planned 21% increase.

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Source: Fool.com