In This Article:
Oneok (NYSE: OKE) has been a pillar of dividend stability over the years. The pipeline company delivered more than a quarter century of payment stability and growth. While it hasn't increased its dividend every single year, it has boosted it by almost 1,230% since 2000.
The pipeline stock recently raised its payment again, increasing it by 4% compared to last year's annualized rate. That pushed its dividend yield up to nearly 4%. Here's a look at what's fueling Oneok's growing dividend and whether it has enough left in the tank to continue increasing its payout.
Building an energy infrastructure growth machine
Oneok has built a premier energy infrastructure asset base. It owns more than 50,000 miles of strategically located pipelines that transport natural gas liquids (NGL), refined products, crude oil, and natural gas from production basins to market centers. It also operates complementary midstream assets, like natural gas process plants, NGL fractionators, and storage terminals. These assets generate resilient cash flow supported by long-term contracts and regulated rate structures.
The company has spent billions of dollars to build its integrated network via organic expansions and acquisitions and has been on a mergers and acquisitions (M&A) binge in recent years. In 2023, it bought Magellan Midstream Partners in a transformational $18.8 billion deal. It followed that up with a $5.9 billion transaction to buy Medallion Midstream and a 43% interest in EnLink Midstream last year.
It has since agreed to buy the remaining publicly held shares of EnLink. Oneok has also invested heavily in high-return organic expansion projects, like its MB-6 fractionator and the full looping of its West Texas NGL Pipeline System, both of which entered service at the end of last year.
These investments have enabled Oneok to steadily grow its earnings despite all the turbulence in the energy markets over the years. The company has delivered 10 straight years of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) growth (2013-2023). It has expanded its adjusted EBITDA at an impressive 15% rate during that period. Growth was on track to accelerate last year (27%) due to its recent acquisitions.
More growth is coming down the pipeline
Oneok entered 2025 with a lot of momentum. It closed its acquisition of Medallion and its investment in EnLink in mid-October but won't close the remaining interest in EnLink until the first quarter of this year. Because of that timing, the company will get most of the benefit of those deals this year. They help fuel its view that it will produce more than $8 billion of adjusted EBITDA this year. That's a more than 20% increase from last year's level.