ONEOK (NYSE:OKE) recently reported strong third-quarter results as earnings and cash flow surged 10% thanks to improving volumes across all three of the company's business segments. However, as good as those results were, the pipeline and processing company expects even more growth over the next few years. That was evident by the comments management made on the accompanying conference call, where it pointed out five factors that fueled its bullish view on the future.

1. The dividend outlook appears bright

Earlier this year, ONEOK unveiled its five-year plan, which made the company seem like a gold mine for income investors. That view hasn't dimmed one bit, according to CFO Walt Hulse, who stated on the call that "management still expects to recommend annual dividend increases of approximately 9%-11% beginning in 2018." Furthermore, he noted that the company also anticipates covering that growing payout with cash flow by at least 1.2 times. That's just what income investors want to hear because it means the attractive 5.6% dividend yield not only appears safe but should increase at a rapid rate over the coming years.

Pipelines with a blue sky in the background.

Image source: Getty Images.

2. We recently secured several new growth projects

The driver of that growth forecast is ONEOK's expanding backlog of new projects. The CFO noted that "since June, we've announced nearly half a billion dollars in attractive, low multiple growth projects, supported by commitments from anchor customers." One of the latest additions is a $200 million expansion of its West Texas LPG joint venture with Martin Midstream Partners (NASDAQ:MMLP). This particular project will not only provide ONEOK and Martin Midstream with a bump in cash flow when it comes on line next year, but it positions the partners to capture significant future growth in the region. Meanwhile, COO Kevin Burdick noted that this project should deliver higher returns than the company's typical investment.

3. More growth is on the way

In addition to securing those projects, ONEOK is lining up its next phase of growth. CEO Terry Spencer noted:

[The company] continue[s] to develop our unannounced inventory of potential capital growth projects. We've updated that inventory, which is now between $2.5-3.5 billion compared with $1.5-2.5 billion previously. This inventory remains heavily focused on NGL infrastructure, which we anticipate could be announced between now and 2020.

Those additional projects will provide further support to the company's ability to achieve its dividend growth target, with the updated inventory making it more likely that ONEOK could boost the payout toward the high end of its guidance range. Meanwhile, Burdick said that it's also having "discussions with producers and markets to develop long-term natural gas takeaway solutions across our footprint, especially out of the Permian Basin." If it can secure these projects, it will further bolster its ability to support and grow the dividend.

4. Our improving financials support our ability to grow

That said, securing new growth projects is only half the equation. The other is that ONEOK needs to obtain financing to build these expansions. That's becoming easier to do thanks to its improving balance sheet. The CFO noted that "ONEOK's trailing 12-month debt to EBITDA improved again to 4.9x at September 30" and that "our annualized third-quarter debt to EBITDA run rate was 4.6x." Further, he said that the company continues "to expect leverage to be around our target of 4x or less by late 2018 or early 2019." This improving leverage ratio enabled the company to repay $1 billion in higher cost debt earlier this year after it was able to complete a $1.2 billion debt offering, which extended its debt maturities at a lower rate while providing it with some incremental proceeds for financing growth projects. 

A person in a hardhat standing near a stack of pipelines.

Image source: Getty Images.

5. We're open to M&A

ONEOK has all the fuel needed to deliver its planned dividend growth over the next few years thanks to the organic growth projects it has underway and in development. That said, CEO Terry Spencer said on the call:

[While the company currently isn't factoring in any acquisition activity], we're always going to be thinking about those opportunities and we've got a strong currency to work with. It's a financially sound company, but I can tell you our focus will be heavily organic and any M&A -- whether it's a bolt-on asset or something even broader from a strategic perspective -- will certainly just be an opportunistic approach.

One thing he pointed out is that its stock gives it a strong currency for pursuing acquisitions since shares trade at a higher valuation than those of some peers. As a result, a stock-based deal wouldn't dilute investors as much as it might for a more cheaply valued rival, which gives ONEOK a competitive advantage when pursuing M&A opportunities.

The future continues to look better

ONEOK's management team made it clear on the third-quarter call that the company's forecast has brightened. In fact, it seems like it might have the fuel to increase the payout at or even above the high end of the target range given the progress it made this year on securing new growth projects and financing. The stock thus remains an excellent option for income seekers to consider.