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ONEOK's $1.03 Quarterly Dividend Signals Resilience Amid Energy Sector Growth

Cyrus ColeMonday, May 5, 2025 5:00 pm ET

58min read

ONEOK, Inc. (NYSE: OKE) has reaffirmed its commitment to shareholder returns with the declaration of a $1.03 per share quarterly dividend, marking a notable increase from its 2024 payout of $0.99 per share. This move underscores the midstream energy giant’s financial strength, driven by strategic acquisitions, operational efficiencies, and a robust balance sheet. Let’s dissect the drivers behind this dividend hike and assess its implications for investors.

Financial Foundation: Strong Earnings Growth

ONEOK’s Q1 2025 results highlight the rationale behind the dividend increase. Adjusted EBITDA surged to $1.78 billion, a 23.7% year-over-year jump, fueled by synergies from the completion of its EnLink Midstream acquisition in January 2025. This deal added $277 million in incremental adjusted EBITDA across segments, with the Natural Gas Gathering and Processing segment alone benefiting by $213 million.

The company’s diluted earnings per share (EPS) totaled $1.04, slightly below Q1 2024’s $1.09 due to one-time transaction costs of $42 million related to the EnLink integration. However, adjusted EPS—excluding these costs—remains robust, reflecting underlying profitability.

Dividend History: A Steady Growth Trajectory

ONEOK’s dividend history since 2020 demonstrates disciplined capital allocation:
- 2020–2022: Quarterly dividend of $0.935, totaling $3.74 annually.
- 2023: Increased to $0.955 per share, lifting the annual dividend to $3.82.
- 2024: Further raised to $0.99 per share, reaching $3.96 annually.
- 2025: The new $1.03 quarterly payout elevates the annual dividend to $4.12, a 5.1% increase over 2024.

This progression aligns with ONEOK’s strategy to balance growth investments with shareholder returns. The dividend’s 5-year CAGR (2020–2025) stands at 16.6%, outpacing many peers in the energy sector.

Key Drivers of Performance

Acquisition Synergies:
The EnLink acquisition expanded ONEOK’s footprint in natural gas processing and LPG logistics. The new 400,000-barrel-per-day LPG export terminal in Texas, set to complement its Mont Belvieu storage hub, positions the company to capitalize on rising global energy demand.
Volume Growth:
Rocky Mountain region throughput rose 15% for NGL raw feed and 7% for natural gas, driven by higher production activity and winter weather-related demand.
Cost Management:
Despite rising employee-related expenses and methane fee accruals, oneok offset these pressures through higher commodity prices and operational efficiencies. For example, the Refined Products and Crude segment saw a $13 million boost from its BridgeTex and Saddlehorn pipelines.

Risks and Considerations

Dividend Coverage:
ONEOK’s dividend cover—earnings retained after dividends—remains tight at 0.9, meaning nearly all earnings are distributed. While the company reaffirmed its $4.12 annual dividend guidance, a material earnings shortfall could strain this balance.
Regulatory and ESG Challenges:
Rising methane regulations and climate policies pose ongoing risks. ONEOK’s focus on ESG initiatives, such as reducing emissions through infrastructure upgrades, will be critical to maintaining operational flexibility.
Share Repurchases:
Under its $2 billion buyback program, ONEOK has repurchased $189 million in shares since 2024. While this supports shareholder value, the pace of buybacks may slow if capital is prioritized for growth projects or debt reduction.

Valuation and Market Outlook

ONEOK’s trailing 12-month dividend yield stands at 4.4% (based on a recent share price of $93.40), offering attractive income potential. However, the stock’s valuation must be weighed against broader energy sector trends.

Conclusion: A Dividend Champion with Growth Catalysts

ONEOK’s $1.03 dividend reflects its ability to generate consistent cash flows even amid industry headwinds. The company’s 23.7% EBITDA growth, strategic acquisitions, and disciplined capital allocation provide a solid foundation for sustaining its dividend.

Key statistics reinforce this outlook:
- Adjusted EBITDA guidance for 2025 remains unchanged at $6.6–$7.0 billion, up from $6.2 billion in 2024.
- Debt-to-EBITDA ratio improved to 4.6x as of Q1 2025, down from 5.1x in 2024, signaling stronger financial flexibility.
- Dividend payout ratio (dividends divided by net income) is ~90%, slightly elevated but manageable given ONEOK’s stable cash flow profile.

Investors seeking income with energy sector exposure should view ONEOK as a high-yield, low-risk option, provided they acknowledge the risks of regulatory shifts and commodity price volatility. With its integrated infrastructure and growth projects like the Texas LPG terminal, ONEOK appears poised to remain a dividend stalwart for years to come.

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