Key Takeaways:
- ONEOK offers a 5.3% forward dividend yield, above its 5-year average of 4.9%, backed by stable, fee-based cash flows.
- Based on TIKR’s valuation model and analyst consensus, the stock could deliver 50.5% total returns by 2027, with a target price of ~$120/share.
- Earnings per share are projected to grow at a 5.8% CAGR through 2027, while dividends are expected to rise at a 4.3% annual clip, with a healthy payout ratio.
ONEOK is a major midstream energy company that gathers, processes, and transports natural gas and natural gas liquids (NGLs) across the U.S.
As the energy transition continues to play out over decades, natural gas infrastructure will likely continue to be an important part of the economy. ONEOK is well-positioned to benefit from that durable demand while steadily compounding returns.
Its recent acquisition of Magellan Midstream expanded its footprint into refined products and crude pipelines, making it one of the most diversified pipeline players in the industry.
The company’s business model is largely fee-based, with long-term contracts that generate recurring cash flows. That steady income stream helps support both its dividend and growth investments. Unlike more volatile commodity-sensitive names, ONEOK focuses on predictable infrastructure revenues and maintaining solid financial health.
Shares are still trading below pre-merger highs as investor sentiment has been slow to recover after the Magellan acquisition. But analysts see strong earnings momentum ahead, supported by margin expansion, cost synergies, and long-term demand for U.S. energy infrastructure.
For long-term income investors, ONEOK provides a rare blend of yield, growth, and stability.
OKE’s Discounted Price Could Be a Hidden Gift
ONEOK currently trades around $80/share. But based on TIKR’s guided valuation model using analyst consensus estimates, the stock could climb to $120/share by the end of 2027.
That implies a 50.5% total return, or about 18.5% annualized, if the company hits its forecast of $6.88/share in EPS while expanding operating margins from 18.8% to 20%.
With a forward P/E of 12.3x today, the stock remains below its 5-year historical average multiple of 15.1x.
For long-term investors, the mix of improving profitability and discounted valuation could be a compelling opportunity.
As cost synergies and margin gains flow through from the Magellan acquisition over the next few years, the stock could re-rate higher as investors reassess its post-merger potential.
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ONEOK’s 5.3% Dividend Yield Stands Out
ONEOK’s forward dividend yield is 5.3%. While that’s slightly below its 5-year average of 6.3%, it still stands out in today’s market and remains well above the S&P 500’s yield. It’s also higher than many large-cap infrastructure peers.
The yield reflects ONEOK’s consistent cash flows from fee-based natural gas transportation and processing contracts, which help buffer against commodity price swings. The 2023 acquisition of Magellan Midstream added refined products exposure and helped diversify the company’s revenue base even further.
While yields above 10% were seen during the 2020 energy selloff, those levels reflected market panic more than a normal baseline. Today’s 5%+ yield is high enough to appeal to income investors, but not so high that it signals serious distress. For long-term investors looking for steady income from a stable midstream operator, ONEOK still remains a compelling option.
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Strong Cash Flows Keep the Dividend Well Protected
ONEOK is expected to generate $5.43 per share in earnings for 2025 while paying out $4.15 in dividends, based on analysts’ consensus estimates.
That results in a payout ratio of approximately 76%, which remains sustainable for a cash-rich midstream business.
Looking ahead, EPS is forecast to climb to $6.88 by 2027, while dividends are projected to rise to $4.52. That implies earnings growth at a 12.6% compound annual rate, with dividends growing at a 4.4% CAGR over the same period.
The payout ratio is expected to ease slightly to 66%, giving the company flexibility to continue rewarding shareholders without overextending its balance sheet.
Expected margin expansion, paired with steady free cash flow, gives ONEOK the financial strength to invest in its infrastructure pipeline while keeping the dividend on solid ground.
For long-term income investors, this mix of margin expansion, earnings visibility, and moderate dividend growth adds up to a durable and dependable income stream.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
