One ok(NYSE: OKE) has been busy lately few of year. The midstream giant has completed several acquisitions that significantly increased its scale, diversification and growth profile.
That fussing and dealing has continued this month. The company recently unveiled two more deals Unpleasant further increase its scale and strengthen its financial profile. These trades will too give him more fuel to almost make it grow 3.5% return dividend.
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Oneok began its transformative shopping spree in May by last year, when it agreed to buy MLP Magellan Midstream Partners in an $18.8 billion cash-and-stock deal. The transaction significantly increased size and diversification, adding crude oil and refined product infrastructure to its midstream activities. The acquisition also made a major contribution: Oneok expected an average increase in free cash flow per share of more than 20% until 2027.
The pipeline company followed that up with two more deals in August, agreeing to acquire Medallion Midstream and take a controlling interest in EnLink Midstream (NYSE: ENLC) from Global Infrastructure Partners for $5.9 billion in cash. The acquisitions further expanded and expanded the midstream footprint. Oneok also expected to immediately add to free cash flow and support its capital allocation strategy, including increasing the dividend by 3% to 4% per year.
This month, Oneok revealed two more transactions. The sale of three natural gas pipeline systems was agreed to DT midstream (NYSE: DTM) for $1.2 billion in cash. It followed that up by agreeing to buy the rest of EnLink That it doesn’t currently own $4.3 billion worth of stock.
Oneok’s latest transactions will achieve several goals. First, the sale of the gas pipeline to DT Midstream will allow the company to capitalize on the value of these stable pipeline assets to strengthen its balance sheet following the recent acquisition spree. The assets are a a lot of better strategic fit for DT Midstream, which focuses on operating stable gas pipelines.
Meanwhile, the deal will provide Oneok with cash to repay debt. The company has set itself the goal of… leverage ratio of 3.5 times in 2026 (are level at the end of the third quarter, before taking into account the recently closed Medallion Midstream and EnLink deals). In a sense, Oneok sells these three gas pipelines recycle that capital in Medallion and EnLink, which are more core activities.
The company followed that up by agreeing to acquire the remainder of EnLink in an all-stock deal worth $4.3 billion. Oneok initially purchased a 43% stake in EnLink for $3 billion in cash. It also bought a 100% stake in its managing member for $300 million. The company will now issue 37 million shares, representing 6% of its total stock outstanding shares— to buy out the rest of EnLink. It expects to complete the transaction in the first quarter of next year.
If you buy the rest of EnLink, you get Oneok full control over the company’s assets. EnLink operates 25 natural gas processing facilities, seven natural gas liquids (NGL) fractionators and 13,000 miles of pipelines in Texas and Louisiana. These assets are a great fit for Oneok, which also focuses on gas processing and NGL infrastructure. EnLink is also emerging as an early leader in providing pipeline transportation services for carbon capture and storage projects.
These latest deals will strengthen Oneok’s balance sheet further increasing its size and scale to better compete with larger midstream rivals. The company is on track to generate more than $8 billion in adjusted earnings before interest, taxes, depreciation and amortization.EBITDA) next year more than double the total compared to a few years ago. That earnings growth will give the country more fuel to increase its high-yield dividend in the coming years.
Oneok has significantly improved its diversification, scale and profit-making capacity in the past few of years by making various acquisitions. It has become a giant in the midstream sector, making it a… strong position for further growth in the future. Therefore, the country should have a lot of fuel to increase its dividend, making it an attractive option for those looking for income and growth in the coming years.
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Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool recommends Oneok. The Motley Fool has a disclosure policy.
This high-yield dividend stock continues to move forward with $5.5 billion in additional deals originally published by The Motley Fool
