The Case for ONE Gas (OGS) as a Core Holding in a Low-Growth, High-Stability Portfolio in 2026

In an economic landscape increasingly defined by low growth and volatile markets, the appeal of utility stocks as stable, predictable investments has never been more pronounced. ONE Gas (OGS), a 100% regulated natural gas utility operating across Texas, Oklahoma, and Kansas, stands out as a compelling candidate for a core holding in such a portfolio. Its business model, fortified by regulatory frameworks, disciplined capital allocation, and a clear trajectory of earnings growth, offers a rare combination of resilience and reliability.

Utility Resilience: A Foundation of Stability

Regulated utilities like ONE Gas are uniquely positioned to weather macroeconomic storms. As a natural gas distributor, OGS operates under a cost-of-service regulatory model, which ensures that it can recover its costs-including investments in infrastructure-through rates approved by state public utility commissions. This structure insulates the company from volatility, as it passes through natural gas costs to customers without adding a profit margin.

The company's 2024 financial guidance underscores this stability: net income is projected to range between $214 million and $231 million, with earnings per diluted share (EPS) expected to reach $3.70–$4.00. By 2026, these figures are anticipated to rise to $294–$302 million in net income and $4.65–$4.77 in EPS, reflecting a compound annual growth rate of approximately 6.5% over two years. Such consistency is rare in a low-growth environment, where most equities struggle to maintain earnings momentum.

Regulatory Tailwinds: Enabling Predictable Growth

The regulatory environment in which ONE Gas operates is a critical tailwind. State commissions not only allow the company to recover costs but also incentivize infrastructure investment through mechanisms like accelerated depreciation and return on equity (ROE) adjustments. For instance, OGS anticipates an average rate base of $6.3 billion in 2026, with annual growth of 7%–9% through 2030. This rate base expansion, driven by system integrity projects and new customer connections, directly translates to higher earnings potential.

Moreover, the company's focus on Texas and Oklahoma-two states with robust population and economic growth-positions it to capitalize on long-term demand. Capital expenditures for new-customer extensions are projected at $230 million in 2026 alone, reflecting the company's alignment with regional development trends. Regulatory frameworks thus act as both a shield against downside risks and a catalyst for incremental growth.

Disciplined Capital Management: A Blueprint for Longevity

ONE Gas's capital management strategy is a testament to its operational discipline. The company plans to invest approximately $800 million in 2026, with a significant portion allocated to system integrity and replacement projects. These investments not only enhance service reliability but also extend the life of its asset base, reducing future maintenance costs. Over the five-year period ending in 2030, annual capital expenditures are expected to remain in the $800 million–$900 million range, supported by an estimated $1.3 billion in net long-term financing needs.

Crucially, OGS aims to achieve long-term diluted EPS growth of 5%–7% through 2030. This target, achievable through a mix of rate base expansion and operational efficiency, aligns with the conservative growth assumptions typical of utility investing. The company's ability to balance reinvestment in its infrastructure with shareholder returns-through dividends and buybacks-further cements its appeal as a core holding.

Conclusion: A Model of Prudent Investment

For investors seeking stability without sacrificing growth, ONE Gas exemplifies the ideal utility investment. Its regulatory moat, coupled with a disciplined approach to capital allocation and a clear line of sight to earnings expansion, makes it a rare asset in a low-growth world. As economic uncertainty persists, the case for OGS as a cornerstone of a high-stability portfolio grows ever stronger.