ONEOK (OKE +0.22%) is one of the largest energy infrastructure companies in the U.S. The company has significantly expanded and diversified its operations over the past five years, following the completion of a series of acquisitions.
Here's a look at the pipeline stock's performance versus the S&P 500 over the last five years.
Image source: Getty Images.
Drilling down into ONEOK's five-year returns
The following table shows ONEOK's share price and total return with reinvested dividends over the past one-, three-, and five-year periods compared to the S&P 500:
|
One-year |
Three-year |
Five-year | |
|---|---|---|---|
|
ONEOK |
-29.5% |
14% |
88.5% |
|
ONEOK (total return with reinvested dividends) |
-27% |
31.4% |
148.4% |
|
S&P 500 |
12.9% |
68.9% |
85.9% |
Data source: Ycharts.
While ONEOK investors might not be happy with the company's more recent performance, they're likely thrilled by its total return over the last five years. Shares of the pipeline company have beaten the S&P 500's returns on their own. Meanwhile, the total return, which includes the company's lucrative dividend income (5.4% current yield), has absolutely obliterated the broader market index.
NYSE: OKE
Key Data Points
The buying binge
Five years ago, ONEOK had three lines of business: natural gas gathering and processing, natural gas pipelines, and natural gas liquids (NGLs). Today, it has a much more diversified midstream platform, having expanded into refined products, crude oil, and export terminals.
The company's transformation began in 2023 with the acquisition of Magellan Midstream Partners in a $18.8 billion deal. The transaction meaningfully enhanced its scale and diversification by adding refined products, crude oil, and export terminals to its portfolio. ONEOK continued to enhance its scale and diversification the following year, purchasing Medallion Midstream and a 43% interest in EnLink for $5.9 billion. Those deals helped establish a fully integrated midstream platform in the high-growth Permian Basin while expanding and extending its footprint into other core regions. ONEOK would go on to buy the rest of EnLink for $4.3 billion earlier this year. Additionally, the company completed a couple of smaller bolt-on deals, including purchasing NGL pipelines from Easton Energy for $280 million and its joint venture partner's 49.9% interest in a Delaware Basin gathering and processing company for $940 million.
These deals have helped fuel meaningful earnings growth over the past few years. They've also helped set the stage for continued growth. ONEOK expects to capture hundreds of millions of dollars in additional merger synergies in the coming years. The company has also approved several growth capital projects that should come online through the middle of 2028.
ONEOK has made its investors happy
ONEOK has generated robust returns over the past five years, driven by its acquisition strategy and a lucrative, growing dividend. The company is in a strong position to continue satisfying its investors over the next five years as it captures additional merger synergies and completes a growing slate of organic capital projects. They should enable it to increase its already attractive dividend by 3% to 4% per year, while potentially giving it the fuel to continue producing robust total returns.
