ONEOK: Strong Yield, Resilient Growth, AI Catalyst

ONEOK (OKE) reported robust financial performance with a 22% year-over-year adjusted EBITDA growth to $2.0B in Q2'25, largely driven by strategic acquisitions like EnLink and strong natural gas segment activity, projecting a 58% FY2024 EBITDA uplift to $8.23B. The company is strategically positioned to capitalize on the accelerating energy demand from the AI-driven U.S. Data Center expansion, a significant long-term growth catalyst, while its fee-based contracts ensure predictable cash flows. Trading at an attractive 9.8x EV/EBITDA, 8% below the industry average, ONEOK offers potential revaluation upside and a 5.6% dividend yield.

Analysis

ONEOK (OKE) is demonstrating significant growth, primarily fueled by an aggressive and accretive acquisition strategy. The company reported a 22% year-over-year increase in adjusted EBITDA to $2.0 billion for Q2'25 and projects a 58% full-year uplift to approximately $8.23 billion, largely attributable to the integration of the Medallion and EnLink assets. This M&A activity has fortified its natural gas-focused pipeline network, which drove 21% YoY EBITDA growth in its core gas segments. A key forward-looking catalyst is the anticipated surge in energy demand from the AI-driven expansion of U.S. data centers, with market forecasts suggesting 10% annual growth in power needs through 2030. ONEOK's business model, which relies on long-term, fee-based contracts, provides substantial cash flow predictability and insulates it from commodity price volatility. Despite this strong performance and growth outlook, the company trades at an attractive valuation with an enterprise-value-to-EBITDA ratio of 9.8x, representing an 8% discount to its peer group average of 10.7x. The primary risk to this thesis is a potential slowdown in future M&A activity, which has been a cornerstone of its recent growth trajectory.

Key Decisions for Investors

• Investors seeking both income and capital appreciation could consider ONEOK due to its strong EBITDA growth, a 5.6% dividend yield, and a valuation discount relative to peers, implying potential for re-rating.
• It is crucial to monitor the company's M&A pipeline, as its ability to execute further accretive acquisitions is identified as a primary catalyst for sustained EBITDA and dividend growth.
• Positioning in ONEOK can be viewed as a derivative play on the secular growth of artificial intelligence, as the company's midstream assets are poised to benefit from the escalating energy requirements of the data center industry.
• For investors with a lower risk tolerance focused on distribution safety, Enterprise Products Partners (EPD) was noted as a potential alternative, despite its slightly lower projected growth rate.