Smart Dividend Portfolio Edition #64: Midstream Momentum
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Dear Investor,
Welcome to the 64th edition of TipRanks’ Smart Dividend Portfolio & Newsletter.
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Market-Moving News: Jun 09, 2025
Stocks clocked in large weekly gains, returning to positive territory year-to-date. The Dow Jones Industrial Average (DJIA) rose by 1.17%, the S&P 500 (SPX) increased by 1.50%, and the tech-heavy Nasdaq-100 (NDX) gained 1.97% for the week. The S&P 500 finished more than 20% above April’s low, reclaiming the 6,000 mark first reached in February, although it remained about 2% shy of its record high.
The week began on a positive note, losing some steam in the second half. The weakness in PMI reports – with the manufacturing activity contracting for a third month in a row and services activity shrinking for the first time in 11 months – infused some gloom. However, Friday saw stocks find their footing again on solid job gains, which allayed fears about an imminent economic downturn.
U.S. jobs growth stayed strong in May, climbing 139,000 with unemployment unchanged at 4.2%. Although the March and April reports were revised downward, May’s report reassured investors, as it reflected a very gradual cooling of the labor market. Still, diving into the job report’s details, a stronger-than-expected wage growth continues to put a floor under inflation. This supports the Federal Reserve’s “wait and see” stance, despite President Trump’s demands for a cut. According to the CME FedWatch Tool, the chances of a June cut are nil, and July’s rate decrease looks increasingly improbable. Prices in interest rate futures markets imply that investors expect two quarter-point rate cuts by year-end, with the first cut not expected until September.
Despite tariff headwinds and macro volatility, S&P 500 companies delivered solid results last quarter. Index members reported 12.9% year-over-year earnings growth – the second straight double-digit increase. 78% of firms – above the five-year average – exceeded EPS estimates. However, the number of companies issuing negative EPS guidance (68) was also above the average. In Q1, the Healthcare sector reported the highest earnings growth, 43%, leaving the Magnificent Seven cohort’s 27.7% increase in the dust. In fact, Mag 7’s earnings growth rate was below the average (32.1%) of the previous three quarters. Still, three members of the Magnificent bunch – Alphabet, Amazon, and Nvidia – are among the top five contributors to earnings growth for the S&P 500 for the first quarter. Interestingly, Bristol Myers Squibb and Gilead Sciences were the other top contributors.
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This Week’s Quality Dividend Stock Idea
ONEOK (OKE) is a leading U.S. midstream energy company, specializing in the gathering, processing, transportation, and storage of natural gas and natural gas liquids (NGLs). Operating across key energy basins, OKE owns an extensive network of pipelines and facilities that serve producers, utilities, and industrial clients. With a focus on operational efficiency and strategic growth, ONEOK maintains a strong presence in the Mid-Continent and Rocky Mountain regions while expanding its footprint through acquisitions and infrastructure investments.
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Energy Evolution
Founded in 1906 in Tulsa, Oklahoma, ONEOK began as a natural gas utility and steadily evolved into a leading U.S. midstream energy company. Originally focused on natural gas distribution, the company expanded its operations to include the gathering, processing, transportation, and storage of natural gas and natural gas liquids (NGLs), enabling it to enter high-production shale basins and major demand centers.
Today, ONEOK operates a ~60,000-mile pipeline network transporting natural gas, NGLs, refined products, and crude oil. With access to nearly 50% of the nation’s refining capacity, the company plays a critical role in the midstream value chain, moving energy products safely, cost-effectively, and with lower emissions. Its pipelines connect upstream production to downstream end users, supporting a range of industrial and consumer needs.
A defining moment for the company came in 2017 with the $17.2 billion acquisition of the remaining public units of ONEOK Partners, creating a fully integrated enterprise valued at $30 billion. This strengthened its NGL and natural gas footprint and improved operational efficiency.
Since then, ONEOK has pursued a strategic transformation through a series of high-impact acquisitions. In 2023, it acquired Magellan Midstream Partners, diversifying into crude oil and refined products and expanding its presence in the Gulf Coast. The $2.6 billion purchase of Medallion Midstream in October 2024 bolstered crude gathering and transportation capabilities in the Permian Basin. This was followed by the two-step acquisition of EnLink Midstream. In 2024, OKE acquired a 43% stake from GIP for $3.3 billion, completing the buyout by January 2025 through a $4 billion all-stock deal. The transaction significantly expanded ONEOK’s scale and integration across the Permian, Mid-Continent, North Texas, and Louisiana.
ONEOK also grew organically, with Elk Creek and West Texas NGL pipeline expansions boosting throughput in the Rockies and Permian regions. In June 2024, it acquired 450 miles of NGL pipelines from Easton Energy for $280 million, enhancing Gulf Coast connectivity. Integration with its Mont Belvieu assets is underway, with additional Houston connections planned through 2025.
Earlier this year, it formed joint ventures with MPLX LP to build a 400-thousand-barrel-per-day (MBbl/d) liquefied petroleum gas (LPG)1 export terminal in Texas City and a connecting pipeline from Mont Belvieu to the terminal. ONEOK owns 50% of the terminal project and 80% of the pipeline venture, with a total investment of $1 billion. Recently, OKE acquired the remaining 49.9% interest in Delaware Basin JV from NGP XI Midstream Holdings for $940 million. Delaware Basin JV owns natural gas gathering and processing facilities in the Delaware Basin in West Texas and New Mexico, with a total processing capacity of more than 700 million cubic feet per day.
Today, with a market capitalization of over $51 billion and annual revenues of around $25 billion, OKE is a member of the S&P 500 index and is ranked #226 on the 2025 Fortune 500 list.
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Midstream Mastery
ONEOK is a leading U.S. midstream energy company focused on providing essential services across the energy value chain, including transporting, processing, and storing natural gas and natural gas liquids (NGLs). Its integrated network spans key energy-producing regions, including the Permian, Mid-Continent, Rocky Mountain, Bakken, and Williston basins. The company operates through four segments: natural gas liquids, refined products and crude, natural gas gathering and processing, and natural gas pipelines. Its core business model is anchored in fee-based contracts, which account for approximately 90% of earnings, offering stable cash flows regardless of commodity price swings.
ONEOK generates revenue through fixed-rate services such as pipeline tariffs, gathering and processing fees, and NGL fractionation. Fractionation is a process that separates natural gas liquids into different hydrocarbon fractions based on their boiling points, resulting in usable products like fuel, plastics, and refrigerants. The 2023 acquisition of Magellan Midstream Partners expanded its footprint into refined products and crude oil logistics, while the 2024 acquisitions of EnLink and Medallion further strengthened its position in strategic basins. These deals have diversified its portfolio, boosted volumes, and unlocked significant synergies, including $250 million in 2025 and a projected $1.3 billion EBITDA uplift by 2027.
Operational momentum continues with high-return projects like the West Texas NGL and Elk Creek pipeline expansions, expected to enhance earnings in the second half of 2025. In April, average processing volumes reached ~1.7 billion cubic feet/day (Bcf/d) in the Rockies and ~2.4 Bcf/d in the Mid-Continent region. Over 95% of OKE’s transportation capacity is backed by long-term contracts, particularly in Oklahoma and Texas.
ONEOK is also positioned to benefit from rising U.S. natural gas demand, including up to 10 Bcf/d from LNG exports and 3–8 Bcf/d from new power and AI data center usage over the next five years. As a result, OKE expects steady or rising gas production in its basins and growing midstream demand to support volumes across power plants, LNG terminals, and new infrastructure.
The company’s customers include some of North America’s lowest-cost hydrocarbon producers, enabling sustained operations even in lower price environments. This means these customers can remain profitable even if oil prices drop, giving them a competitive edge and the flexibility to continue investing in longer lateral wells.
ONEOK maintains capital discipline by flexing spending in response to market conditions. During economic downturns, it has historically cut up to $1 billion in annual capex by deferring large, long-term projects while sustaining essential growth and maintenance. For 2025, the company plans total capital spending of $2.8–$3.2 billion, with about $1 billion classified as discretionary. This flexibility supports financial stability and helps preserve a strong balance sheet during volatile periods.
ONEOK has stated that tariffs and regulatory risks have not impacted its LPG export strategy. With limited domestic demand, LPG must be exported, and volumes have remained stable despite price fluctuations. The company also benefits from significant crude and NGL storage capacity, allowing it to capitalize on contango markets – where future prices exceed current spot prices – by storing products and selling at a premium later, supporting earnings through profitable arbitrage. This flexibility supports earnings, particularly when market dynamics favor storage-driven gains.
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1 – LPG is a byproduct of natural gas and crude oil processing.
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Financial Fortitude
ONEOK has delivered resilient financial performance in recent years, anchored by its stable, fee-based midstream operations. Over the past three years, the company’s revenues and EPS grew at a CAGR of 9.9% and 15%, respectively. This growth was fueled by a combination of strategic acquisitions, increased volumes across key regions, and its low-risk earnings model.
In the first quarter of FY25, ONEOK posted EPS of $1.04, slightly down from $1.09 in the prior-year period and below analyst expectations, primarily due to the absence of contributions from interstate pipeline assets sold in December 2024. However, revenue for the quarter surged 68.2% year-over-year to $8.04 billion, beating consensus estimates. This was largely driven by the completion of the EnLink Midstream acquisition in January and continued momentum from the Medallion acquisition. These deals significantly expanded ONEOK’s operational footprint and strengthened its position in the Permian and Gulf Coast regions. Operationally, NGL raw feed throughput rose 4.2% year-over-year, while natural gas processing volumes in the Rocky Mountain region climbed 15% year-over-year.
Adjusted EBITDA increased 23.2% year-over-year to $1.78 billion in Q1, with nearly $450 million in contributions from the EnLink and Medallion acquisitions. ONEOK expects continued synergy benefits from its EnLink, Medallion, and Magellan acquisitions to drive high-teens percentage EBITDA growth through 2026 and 2027, outpacing its standalone forecast. Operating income rose 14.6% to $1.22 billion in the quarter, supported by volume growth and accretive acquisitions.
ONEOK reported $275 million in free cash flow in Q1, up significantly from $84 million a year earlier. This improvement was driven by strong volume growth, recent acquisitions, and prudent cash management. The company also posted a return on equity of 17.1% and a return on assets of 5.65%, placing it among the top 20% and 30%, respectively, in the oil and gas industry.
ONEOK reaffirmed its full-year 2025 guidance, projecting adjusted EBITDA of $8.3 billion and adjusted EPS of $5.37, both at midpoint. The company also remains committed to financial discipline, ending Q1 with a net debt-to-EBITDA ratio of 3.9x and targeting 3.5x by 2026. In line with this, it repaid $250 million in senior notes during the quarter. Backed by investment-grade credit ratings of “BBB” from S&P and Fitch, and “Baa2” from Moody’s, along with a 7.6% return on invested capital that places it in the top 30% of the oil and gas industry, ONEOK continues to demonstrate strong balance sheet discipline. Looking ahead, ONEOK anticipates mid-single-digit free cash flow growth in the second half of 2025 as infrastructure projects like the West Texas NGL and Elk Creek expansions come online.
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Shareholder Focus
ONEOK continues to prioritize shareholder value through a disciplined capital return strategy, supported by strong free cash flow and a stable, fee-based business model. With investment-grade credit ratings and a long-standing track record, the company balances reinvestment in growth with consistent returns to investors.
ONEOK has paid dividends for 53 consecutive years, reflecting its financial stability. While the dividend remained flat between 2020 and 2022 due to pandemic-related pressures, the company resumed growth thereafter. While the company has been rising its payouts at a steady pace, dividend growth has been moderate at around 2% annually in the past five years – however, with OKE’s already-high yield, moderate growth is to be expected. In Q1 2025, ONEOK paid a quarterly dividend of $1.03 per share, or $4.12 annualized, yielding around 5% – well above the energy sector average. With a payout ratio of approximately 79%, the company retains sufficient flexibility to fund high-return infrastructure investments while supporting income-focused shareholders.
Beyond dividends, ONEOK also repurchases shares under its $2 billion buyback program. In Q1 2025, it repurchased $17 million worth of stock, bringing total buybacks to $189 million since the program’s inception. Management plans to allocate 75–85% of free cash flow to dividends and buybacks, reflecting confidence in the company’s long-term value and earnings power.
OKE’s stock has gained around 4% over the past year, supported by strong earnings, stable cash flows, and a growing asset base. It currently trades at a P/E ratio of 16.3x, which sits in the moderate range relative to peers.
Overall, analysts project a nearly 30% upside in the stock price over the next 12 months, with some analysts projecting an upside of ~80%, driven by growing energy demand and OKE’s expanded asset base post-Magellan acquisition. Discounted cash flow models suggest the stock may be undervalued by as much as 52%, pointing to further upside potential for investors.
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Investing Takeaway
ONEOK stands out as a resilient and strategically positioned midstream energy company with a proven track record of value creation. Its transformation from a regional utility into a fully integrated player has been driven by a mix of high-impact acquisitions and targeted infrastructure investments. The company’s fee-based business model provides predictable cash flows, while its diversified footprint across key U.S. basins offers both stability and growth opportunities. With a strong focus on capital discipline and shareholder returns, ONEOK is well-equipped to navigate market volatility and capitalize on rising energy demand. Its ability to adapt capital spending, streamline operations, and consistently deliver dividends makes it a compelling choice for long-term investors seeking both income and capital appreciation from the energy sector.
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Dividend Investor Portfolio
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Portfolio News
▣ ADP’s (ADP) ex-dividend date is set for June 13, and the dividend is scheduled to be paid on July 1.
▣ BlackRock (BLK) Vanguard, and State Street’s asset management arm are seeking to dismiss a lawsuit accusing them of colluding to pressure coal producers to cut output under the guise of environmental goals, according to Bloomberg. The suit alleges the firms, which hold significant stakes in coal companies, benefited from rising energy prices. Meanwhile, in another development, the Texas state comptroller has removed BlackRock from its investment blacklist, allowing state pension and investment funds managing approximately $300 billion to invest in the firm again. BlackRock welcomed the move, noting that its clients have over $400 billion invested in Texas, supporting the state’s economic growth.
▣ JPMorgan Chase (JPM) is expanding its collateral framework to include cryptocurrency-linked assets for loans, starting with BlackRock’s iShares Bitcoin Trust, according to Bloomberg. The move will initially apply to the bank’s trading and wealth management clients. In addition to accepting crypto-linked assets as collateral, JPMorgan will also factor in clients’ cryptocurrency holdings when evaluating their net worth and liquid assets, treating them similarly to traditional assets like stocks, vehicles, or art.
▣ LyondellBasell (LYB) has entered into exclusive talks with Aequita to sell select olefins and polyolefins assets in Europe, as part of its ongoing strategic review. The assets, located in France, Germany, the UK, and Tarragona, comprise both integrated and standalone sites, as well as central support functions in Rotterdam. Under a put option agreement, Aequita has committed to proceed with the purchase if LyondellBasell exercises its option following required employee consultations. The deal is expected to close in the first half of 2026, pending regulatory approvals and other customary conditions.
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Recent Trades
None at the moment, although we are considering adding a stock to our portfolio when the market conditions allow for an attractive entry point. Stay tuned.
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Portfolio Attributes
| Dividend Portfolio Yield |
Expected Dividend Growth | Expected Annual Income |
| 3.98% | +6.62% | $6,009.10 |
| Yield-on-Cost Adjusted, Weighted |
Average Analyst 12-Month Growth Outlook | 10K Per Stock at the Time of Purchase |
Current Portfolio
| Name | EX-Dividend Date | Payment Date | Yield on Cost | Annual DPS |
| Automatic Data Processing (ADP) | Sep 16, 2025 | Oct 02, 2025 | 2.46% | $6.16 |
| Amgen (AMGN) | Aug 18, 2025 | Sep 09, 2025 | 3.27% | $9.52 |
| BlackRock (BLK) | Sep 09, 2025 | Sep 23, 2025 | 2.61% | $20.84 |
| Bank of Nova Scotia (BNS) | Jul 02, 2025 | Jul 29, 2025 | 5.98% | $3.2 |
| EOG Resources (EOG) | Jul 17, 2025 | Jul 31, 2025 | 3.06% | $3.92 |
| ExxonMobil (XOM) | Aug 15, 2025 | Sep 10, 2025 | 3.64% | $3.96 |
| IBM (IBM) | Aug 11, 2025 | Sep 10, 2025 | 3.14% | $6.72 |
| JPMorgan Chase (JPM) | Jul 08, 2025 | Jul 31, 2025 | 3.2% | $5.60 |
| Kroger (KR) | Aug 15, 2025 | Sep 01, 2025 | 2.82% | $1.28 |
| LyondellBasell (LYB) | Aug 26, 2025 | Sep 03, 2025 | 5.74% | $5.48 |
| PepsiCo (PEP) | Sep 09, 2025 | Sep 30, 2025 | 3.64% | $5.44 |
| Philip Morris (PM) | Jun 23, 2025 | Jul 17, 2025 | 6.06% | $5.40 |
| Qualcomm (QCOM) | Sep 05, 2025 | Sep 26, 2025 | 2.36% | $3.56 |
| VICI Properties (VICI) | Jun 18, 2025 | Jul 03, 2025 | 5.22% | $1.73 |
| Verizon (VZ) | Jul 10, 2025 | Aug 05, 2025 | 6.09% | $2.71 |
NameEX-Dividend DatePayment DateYield on Cost Annual DPS
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Click here for more stock market analysis from TipRanks Macro & Markets research analyst Yulia Vaiman
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Disclaimer
The information contained in this article represents the views and opinions of the writer only, and not the views or opinions of TipRanks or its affiliates and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy, or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment, and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices, or performance.
