This Resilient Dividend Stock Is Outperforming the Market in 2026, and It Still Looks Like a Buy

Oneok (NYSE: OKE) is one of the more resilient dividend stocks in the energy sector. The energy midstream company has delivered over a quarter-century of dividend stability and growth. It currently offers a dividend yield of more than 5%.

The pipeline company is off to a strong start this year, rallying about 15% and outpacing the S&P 500's 3% gain. Despite that surge, Oneok still looks like a buy. Here's why.

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Built for resiliency

The energy sector can be very volatile. We've seen that this year, as oil prices doubled at one point due to the war with Iran. This volatility can affect energy companies' cash flows, making it difficult for some to maintain their dividends during industry downturns.

That makes Oneok's more than 25-year track record of paying a stable-to-growing dividend stand out. While the midstream company hasn't increased its payout every year, it has nearly doubled its payment over the past decade, leading its three biggest peers, which have all cut their dividends at least once during that period.

A big driver of the company's resiliency is the durability of its cash flows. Oneok primarily generates fee-based earnings backed by long-term contracts and government-regulated rate structures. Three of the company's four business segments expect to generate about 90% of their earnings from fee-based sources this year, while its gas pipeline segment will be about 85% fee-based.

Oneok also has a strong investment-grade balance sheet with a low leverage ratio. That provides it with the financial flexibility to reinvest in growing its business. Oneok also retains 15% to 25% of its cash flow from operations after paying dividends and repurchasing shares to strengthen its balance sheet and support continued growth.

More growth ahead

Oneok uses its financial resources to make acquisitions and invest in organic expansion projects. It has made several needle-moving deals in recent years, including buying Magellan Midstream Partners for $18.8 billion in 2023, Medallion Midstream and a 43% interest in EnLink for $5.9 billion in 2024, and the rest of EnLink for $4.3 billion later that year. These deals meaningfully increased its scale and diversification.

The company has also invested heavily in expansion projects over the years. It currently has several projects underway, including joint ventures to build the Texas City Logistics Export Terminal and the Eiger Express Pipeline. Meanwhile, it's pursuing additional opportunities, notably in its gas pipeline segment, to support rising demand from data centers and liquefied natural gas (LNG) export terminals.

Merger synergies from prior acquisitions will add $150 million in earnings this year, with more expected in 2027 and beyond. Meanwhile, its current slate of expansion projects will boost its earnings as they enter commercial service through the middle of 2028.

That combination of merger synergies and expansion projects should drive around 9% compound annual earnings-per-share growth over the next three years. This earnings growth supports Oneok's plan to increase its high-yielding dividend at a 3% to 4% annual rate.

A unique opportunity

Oneok currently trades at about 15 times forward earnings following this year's rally in its stock price. That's well below the S&P 500's level of around 21.5 times forward earnings. It's a very reasonable valuation for a company that expects to grow its earnings at a 9% compound annual rate over the next few years. That lower valuation is also one reason why it currently offers a 5% dividend yield.

Add it all up, and Oneok still looks like a buy. It could deliver double-digit total annual returns from here, given its low valuation, high dividend yield, and healthy earnings growth rate.

Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool recommends Oneok. The Motley Fool has a disclosure policy.