Oneok strengthens growth strategy with billion-dollar acquisitions

Oneok, one of the leading pipeline companies, has achieved impressive progress in dividend distribution, consistently increasing its payouts over a quarter of a century. In the past ten years, the industry leader has raised its dividend by more than 150%. Currently, the company's dividend yield stands at around 4.5%, and new acquisitions are expected to further drive growth. The company plans two strategic acquisitions to expand its presence and improve cash flow and returns to shareholders. These measures are intended to make Oneok even more attractive to investors aiming for growing income streams. Specifically, Oneok has struck a deal with Global Infrastructure Partners (GIP). The company is acquiring a 43% stake in EnLink Midstream for three billion USD in cash and is taking full control of the managing partner for an additional 300 million USD. Additionally, Oneok is purchasing Medallion Midstream for 2.6 billion USD in cash. These transactions are expected to close early in the fourth quarter. Upon completion of these deals, Oneok plans to acquire the publicly traded shares of EnLink through a tax-free transaction. EnLink is currently valued at 12.3 billion USD. These comprehensive transactions create an integrated platform in the Permian Basin and expand operations in the Midcontinent, North Texas, and Louisiana regions. In addition to geographic benefits, Oneok is further diversifying its business field. The company will derive 35% of its revenue from natural gas liquids, 29% from gathering and processing, 27% from crude oil and refined products, and 9% from gas pipelines. A significant portion of this revenue also comes from the growing CO2 transportation sector, which supports carbon capture and storage projects. The combined group expects an annual EBITDA of approximately eight billion USD, a significant increase from the current 6.2 billion USD and a doubling since the merger with Magellan last year. Oneok anticipates that the acquisitions will immediately have a positive impact on earnings per share and free cash flow. Projections indicate that earnings per share will grow by more than 5% annually through 2028, and free cash flow per share will increase by over 15%. Even more impressive is the synergy potential, estimated to be between 250 and 450 million USD within three years following the completion of the deals. These lucrative acquisitions support Oneok's capital allocation strategy. In the coming years, the company plans to return 75% to 85% of its free cash flow after capital expenditures to shareholders. This will enable an annual dividend increase of 3% to 4% and the repurchase of its own shares worth two billion USD. The remaining free cash flow will be used to reduce the already solid debt. Through these strategic and financially lucrative acquisitions, Oneok continues to expand its business and strengthen its ability to increase dividends. These qualities make the stock a particularly attractive choice for investors focused on income and capital appreciation.