ONEOK: Steady Dividends in a Volatile Energy Landscape

Amidst the energy sector's turbulence—marked by fluctuating commodity prices, geopolitical risks, and the shift toward sustainable energy—ONEOK, Inc. (NYSE: OKE) stands out as a bastion of dividend stability. With a $1.03 quarterly dividend unchanged since January 2025 and a 5.2% yield, the company's robust cash flows and disciplined capital allocation strategy position it as a top pick for income-focused investors. Let's dissect why ONEOK's dividend reliability contrasts sharply with peers' struggles and why it's worth considering now.

Dividend Consistency Amid Sector Volatility

ONEOK's dividend policy has been a model of reliability. The $1.03 per-share quarterly payout, unchanged since early 2025, translates to an annualized $4.12 dividend. At a recent closing price of $81.61 (), this yields 5.2%—a compelling return for income investors. This stability is underpinned by the company's core asset: a sprawling network of natural gas pipelines and storage facilities serving high-demand markets.

The dividend's safety is further bolstered by ONEOK's strong cash flows. Its distributable cash flow (DCF) coverage ratio of 1.0x (meaning cash flow comfortably covers dividends) and a disciplined $2 billion share buyback program since 2022 have reinforced financial flexibility. Unlike peers scrambling to cut dividends to fund transition costs, ONEOK's infrastructure plays a critical role in the energy mix, shielding it from extreme volatility.

Contrast with Peers: Dividend Cuts Highlight ONEOK's Edge

While ONEOK maintains its dividend, many energy peers face pressure to reduce payouts. For instance, Liberty Energy (LBRT) and Whitecap Resources (WCP) are navigating liquidity strains and declining returns on capital, forcing them to prioritize debt reduction over shareholder returns.

• Liberty Energy: Despite maintaining its $0.08/share dividend since 2022, its Q2 2025 results revealed a drop in ROCE to 12% from 44% in 2023, raising concerns about its ability to sustain payouts.
• Whitecap Resources: While its $0.0608/share dividend has held steady, its net debt spiked to $3.5 billion post-merger, forcing reliance on asset sales and cost-cutting to preserve liquidity.

ONEOK's contrast is stark. Its diversified pipeline network—transporting 19 billion cubic feet of natural gas daily—generates stable toll-based revenues, insulating it from commodity price swings. This infrastructure resilience, combined with its conservative leverage (net debt/EBITDA of ~3.5x, well below peers), allows ONEOK to prioritize shareholders without overextending.

Growth Initiatives: Beyond the Dividend

ONEOK isn't just defending its payout—it's investing in future growth. Key projects include:
1. Greenfield Pipeline Expansion: A $500 million project to connect Permian Basin shale gas to Midwest markets, expected to boost throughput by 15% by 2026.
2. Hydrogen Infrastructure Development: Partnering with Shell to explore hydrogen transport via repurposed pipelines, aligning with the energy transition while leveraging existing assets.

These moves aim to future-proof ONEOK's cash flows, ensuring dividend sustainability even as the sector evolves.

Risks and Considerations

No investment is without risk. ONEOK's exposure to natural gas demand makes it vulnerable to prolonged declines in commodity prices or regulatory shifts. Additionally, the company's dividend cover ratio of 0.9 (cash flow per $1 of dividend) leaves little margin for error if cash flows falter.

However, these risks are mitigated by:
- Inelastic Demand: Natural gas remains a cornerstone of U.S. energy production, with pipelines operating under long-term contracts.
- Regulatory Tailwinds: Federal support for critical infrastructure projects, including ONEOK's expansion plans, reduces policy uncertainty.

Investment Thesis: A Compelling Income Play

For income investors seeking stability in an uncertain sector, ONEOK offers a rare combination of:
1. High Yield: The 5.2% dividend yield is among the highest in the midstream sector.
2. Capital Discipline: The $2 billion buyback since 2022 has reduced shares outstanding by 6%, boosting per-share returns.
3. Growth Catalysts: Pipeline expansions and hydrogen initiatives provide long-term upside.

Action Items for Investors:
- Buy on dips: ONEOK's stock has dipped 8% YTD due to broader energy sector weakness, creating an entry point near $80/share.
- Hold for income: The dividend's stability makes it a core holding for retirement portfolios.
- Monitor coverage ratios: A DCF coverage ratio below 1.0x would signal caution.

Conclusion

ONEOK's dividend stability in a turbulent sector is no accident—it's the result of a fortress balance sheet, cash-generating assets, and strategic investments. While peers cut payouts to survive, ONEOK is thriving, offering income investors a rare blend of yield and growth. With a 5.2% yield and a pipeline network that remains indispensable to U.S. energy infrastructure, ONEOK deserves a place in any portfolio seeking steady returns.

Investors prioritizing reliability over risk should consider adding OKE now—before the market catches on to its underappreciated value.