Oneok (OKE +0.54%) offers investors an attractive dividend yield today. At 5.5%, it's several times above the S&P 500's dividend yield, which is approaching its record low at around 1.2%.
While higher-yielding dividend stocks can have higher risk profiles, that's not the case with Oneok's payout. It's on rock-solid ground. That's enabling the pipeline company to give its investors another raise.
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Another pay bump
Oneok recently declared its latest quarterly dividend payment. The diversified energy midstream company will pay $1.07 per share ($4.28 annualized) on Feb. 13 to investors who hold shares by Feb 2. That's a 4% increase from its prior level.
That continues the pipeline company's quarter-century track record of delivering stable to growing dividends for its investors. While Oneok hasn't increased its dividend every year during that period, it has nearly doubled its dividend payment over the past decade. It has a much better track record than its closest peers in the pipeline industry, most of which have reduced their dividend payments at some point over the past 10 years.
NYSE: OKE
Key Data Points
More dividend increases to come
Oneok's current target is to grow its dividend by 3% to 4% each year. That's a very achievable goal, given its financial strength and the visible growth it has coming down the pipeline.
The pipeline company's diversified midstream operations generate very stable cash flow as long-term contracts and government-regulated rate structures underpin the bulk of its assets. Additionally, the company has an investment-grade credit rating backed by a conservative 3.5 times leverage ratio.
Oneok has grown significantly in recent years by completing a series of large-scale acquisitions. It sees the potential of capturing several hundred million dollars in additional cost savings and commercial synergies from these deals, including $250 million targeted for 2026.
Meanwhile, the company has several organic expansion projects under construction to expand its midstream operations. It currently has projects underway that should enter commercial service through the middle of 2028, including joint ventures (JVs) to build a new LPG export terminal and a large-scale natural gas pipeline. These projects will provide Oneok with incremental sources of stable cash flow as they enter commercial service over the next few years.
Oneok's strong financial profile will enable the company to continue expanding its operations. It can make bolt-on acquisitions like last year's $940 million deal to acquire the remaining 49.9% JV interest in its Delaware G&P. It can also continue to approve organic capital projects to expand its operations. Securing additional investments would further enhance and extend the visibility of its growth profile.
A rock-solid income stock
Oneok offers investors a big-time income stream these days. The pipeline giant's dividend is on a rock-solid foundation, thanks to its stable cash flows and strong financial profile. Meanwhile, with more growth coming down the pipeline, it should have ample fuel to continue increasing its high-yielding payout.
