Kinetik Holdings: Buy, Sell, or Hold After Its Recent Run?

It's been a solid year for mid-cap stocks and an even better one for broader gauges of high-yield pipeline stocks. Combine those two concepts, and there's potential for investors to be cooking with gas (pun very much intended).

Just look at Kinetik Holdings (NYSE: KNTK). With a market capitalization of $8.9 billion, this pipeline operator is a mid-cap stock. As is the case with so many equities with that designation, Kinetik flies somewhat under the radar. That relative anonymity is amplified when measuring this name against larger, more widely known midstream companies.

This midstream stock is hot, but it's still a "buy." Image source: Getty Images.

Fortunately, investing isn't a popularity contest, and Kinetik's quiet-by-comparison hasn't prevented the stock from surging more than 57% this year, including a pop of 7.6% in August. More good news: Those aren't the only reasons the stock is still a buy.

Make the Kinetik connection

For the uninitiated, Kinetik operates primarily in the Delaware Basin, an oil- and natural gas-rich corner of the broader Permian Basin. The company's footprint is pertinent because, in its own words, it's a "pure-play, Permian-to-Gulf Coast" operator. Not many competitors can match that purity.

Second, Kinetik's focus on the Delaware Basin is material to long-term investors because, amid political pushes to "unlock American energy dominance," this region fits squarely in that theme. The Delaware Basin's proven reserves consist of 46.3 billion barrels of oil, a staggering 281 trillion cubic feet of natural gas, and 20 billion barrels of natural gas liquids (NGLs). That's more than enough to keep exploration and production companies and midstream operators such as Kinetik busy (and potentially profitable) for years to come.

Yes, this stock is hot, and some analysts think it may be due for a breather, but there are no guarantees that a pullback deep enough to satisfy eager dip buyers will arrive.

What's more, this is a fundamentally sound midstream company. Record second-quarter results and increased 2026 guidance confirm as much. Importantly, the higher 2026 earnings before interest, taxes, depreciation, and amortization (EBITDA) aren't just the product of what Kinetik delivered in the first half of the year, but also of how it sees things setting up in the third and fourth quarters.

Emerging dividend dependability

Another important point is that, in its current form, Kinetik isn't even five years old. However, there have already been three dividend hikes, including one announced in January. So, in short order, this midstream name is positioning itself as a legitimate oil dividend stock.

The company generated nearly $195 million in distributable cash flow (DCF) in the second quarter. That's important because DCF is the marquee metric by which analysts and investors assess midstream companies' ability to pay dividends. Put simply, its payout doesn't burden Kinetik, a fact affirmed by a coverage ratio of 1.47x at the end of the June quarter.

Vernacular like "coverage ratio" sounds nerdy. Still, it's important to income investors, and with a little extra "oomph" on that front, Kinetik can get into a range that older, larger midstream companies typically occupy. Moving in that direction is one more reason the stock is a "buy" candidate today.

Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.