Critical Comparison: ONEOK (OKE) versus Valero Energy Partners (VLP)

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

Volatility and Risk

ONEOK has a beta of 1.26, suggesting that its share price is 26% more volatile than the S&P 500. Comparatively, Valero Energy Partners has a beta of 0.65, suggesting that its share price is 35% less volatile than the S&P 500.

Profitability

This table compares ONEOK and Valero Energy Partners’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
ONEOK 3.76% 9.25% 2.53%
Valero Energy Partners 52.75% 158.05% 22.15%

Analyst Recommendations

This is a summary of current ratings and target prices for ONEOK and Valero Energy Partners, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
ONEOK 0 6 7 0 2.54
Valero Energy Partners 0 3 6 0 2.67

ONEOK presently has a consensus target price of $59.64, suggesting a potential upside of 4.30%. Valero Energy Partners has a consensus target price of $50.38, suggesting a potential upside of 28.08%. Given Valero Energy Partners’ stronger consensus rating and higher probable upside, analysts clearly believe Valero Energy Partners is more favorable than ONEOK.

Dividends

ONEOK pays an annual dividend of $3.08 per share and has a dividend yield of 5.4%. Valero Energy Partners pays an annual dividend of $2.03 per share and has a dividend yield of 5.2%. ONEOK pays out 192.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Valero Energy Partners pays out 73.0% of its earnings in the form of a dividend. ONEOK has raised its dividend for 15 consecutive years and Valero Energy Partners has raised its dividend for 3 consecutive years. ONEOK is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings & Valuation

This table compares ONEOK and Valero Energy Partners’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
ONEOK $8.92 billion 2.63 $352.03 million $1.60 35.74
Valero Energy Partners $452.01 million 6.15 $238.43 million $2.78 14.15

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

Institutional & Insider Ownership

66.2% of ONEOK shares are owned by institutional investors. Comparatively, 29.2% of Valero Energy Partners shares are owned by institutional investors. 1.0% of ONEOK shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Summary

ONEOK beats Valero Energy Partners on 9 of the 17 factors compared between the two stocks.

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.

About Valero Energy Partners

Valero Energy Partners LP owns, operates, develops and acquires crude oil and refined petroleum products pipelines, terminals, and other transportation and logistics assets. The Company’s assets include crude oil and refined petroleum products pipelines, terminals, and other logistics assets in the United States Gulf Coast and the United States Mid-Continent regions that are integral to the operations of the ten of Valero Energy Corporation (Valero) refineries. It provides assets and services, such as Port Arthur logistics system, McKee logistics system, Memphis logistics system, Three Rivers logistics system, Ardmore logistics system, Houston logistics system, St. Charles logistics system, Corpus Christi logistics system and Meraux logistics system. Port Arthur logistics system includes its Lucas crude system and its Port Arthur products system. McKee logistics system is a crude oil and refined petroleum products pipeline and terminal system supporting Valero’s McKee Refinery.

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