This 4.7%-Yielding Dividend Stock Has High-Octane Growth Coming Down the Pipeline Through 2028

Matt DiLallo, The Motley Fool

Thu, May 1, 2025, 6:01 AM 4 min read

• Oneok has grown briskly over the past decade.

• The company has more growth coming down the pipeline.

• It should have ample fuel to continue increasing its high-yielding dividend.

Oneok (NYSE: OKE) is a bit of an outlier. The energy infrastructure company has a high-yielding dividend (recently around 4.7%) and a high earnings growth rate (more than 10% annually). That growth and income combo has enabled the company to produce strong total returns (13% annually over the past decade).

The energy midstream company has a lot of growth coming down the pipeline over the next several years. Because of that, it could continue producing robust total returns, making it look like an attractive long-term investment opportunity.

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Oneok has grown its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for 11 straight years. It has delivered an impressive growth rate of more than 16% annually during that period. What makes that growth even more remarkable is that crude oil prices have declined during that time frame, including experiencing two major plunges (the oil price war from 2014-2016, and the pandemic in 2020 and 2021).

The company overcame the decline in oil prices because volumes, not pricing, fuel its earnings. Oil and gas production and demand have risen during that period, which has driven higher volumes through its existing assets. Rising demand also allowed the company to invest in expansion projects to support volume growth.

On top of that, Oneok has made several major acquisitions that have accelerated its growth rate in recent years. In 2023, it completed its transformational $18.8 billion acquisition of Magellan Midstream Partners. Last year, it bought Medallion Midstream and a controlling interest in EnLink Midstream for $5.9 billion. It followed that up by purchasing the remainder of EnLink earlier this year.

Those acquisitions have significantly expanded Oneok's operations and earnings. Its adjusted EBITDA is on track to rise from $5.2 billion in 2023 to over $8.2 billion this year, a nearly 60% surge.

Oneok's acquisition spree provided it with incremental income from the acquired companies and visible growth from capturing cost and commercial synergies. Those synergies will add over $250 million to the company's bottom line this year. It expects to capture additional synergies in 2026 and 2027. That helps drive the company's view that its adjusted EBITDA will increase by around 10% next year, while its earnings per share will jump by more than 15%.