In February 2017, ONEOK (NYSE:OKE) announced a bold plan to deliver enhanced dividend growth by acquiring its MLP. The company estimated that the deal would enable it to boost its payout by 21% upon closing, and at a 9% to 11% annual rate through 2021. Fueling the forecast was the anticipation that the company would be able to secure about $2.5 billion of expansion projects to bolster cash flow.

However, the company has vastly exceeded expectations on the expansion front: Since last June, when the merger closed, it has announced $4 billion of high-return growth projects, and with a few more added recently, it shows no signs of slowing down.

Pipelines heading into an industrial complex.

Image source: Getty Images.

The latest additions

This past week, ONEOK announced plans to expand its natural gas pipeline infrastructures in the fast-growing Permian Basin and the STACK shale play of Oklahoma. Overall, the company plans to add up to 1.7 billion cubic feet per day (Bcf/d) of additional natural gas takeaway capacity in those two regions.

The company has four projects planned across three of its systems. One project would expand the capacity of its WesTex Transmission system in the Permian Basin to delivery points in the Texas Panhandle. Two others would expand the ONEOK Gas Transportation network in the STACK to new delivery points in both the East and West. Finally, it would make its Roadrunner Gas Transmission system flow in both directions.

The company noted that these projects will require minimal capital investment since they mainly involve building facilities to compress natural gas so that more of it can flow through the existing pipes. Because of that, these projects will also have quick turnaround times: The westbound expansion of ONEOK Gas Transportation is expected to be in service by year's end, while the other three projects should start up early next year. As a result, they'll rapidly boost the company's earnings, with management estimating that it could generate as much as $40 million in incremental EBITDA if it secures contracts for all of its planned capacity expansions. That would provide a 2% boost to the bottom line in the near term for minimal effort.

Holding down the fort until the next wave hits

These small expansions will serve as a nice bridge for ONEOK while it completes construction of several large projects announced earlier this year. One of those is the Elk Creek Pipeline, which will move natural gas liquids (NGLs) from the Rockies to a hub in Kansas. The company plans to invest $1.4 billion in the pipeline and related infrastructure, which should come into service by the end of next year. It will be a needle-mover for the company, since it is expected to generate between $233 million and $350 million of annual EBITDA.

Two other major projects are the Arbuckle II Pipeline and the MB-4 Fractionator, which will move NGLs from Oklahoma toward the coast, and then separate them into streams of ethane, propane, and butane. These two projects will cost an estimated $1.94 billion and generate between $322.5 million and $384 million in annual EBITDA when they come online in early 2020. The surge in earnings and cash flow from these major projects, in combination with the incremental boosts from an array of smaller ones, will put ONEOK in a solid position to hit its ambitious dividend-growth targets.

The clarity continues to improve

When ONEOK first announced its enhanced dividend growth plan, there was some understandable skepticism from the market, since the company had yet to lock up the growth projects it would require to support its forecast. However, it quickly secured an array of expansions that will significantly increase cash flow in the coming years. Because of that, this high-yielding dividend growth stock is in a class of its own.

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool owns shares of ONEOK. The Motley Fool has a disclosure policy.