Oneok (OKE) is the focus of this week’s Income investor, boasting strong fundamentals, modest growth and an impressive 6% dividend stock yield.

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Headquartered in Tulsa, Okla., this natural gas transport and infrastructure company manages more than 10% of U.S. natural gas production.

It accomplishes this enormous task through processing plants and pipelines across the Rocky Mountain, Midcontinent and Permian Regions.

Excellent Dividend Stock History

Oneok stands out as one of the top dividend stocks in the S&P 500, offering an annual 6% yield. This places the company near the top of the heap because the index’s average payout is just 1.5%.

It also has a long and dependable track record of paying dividends, stretching all the way back to 1972.

Soaring energy prices have provided tail winds for Oneok earnings. The company reported strong second-quarter results, beating analyst estimates with a profit of 92 cents per share, while $414.4 million in net income marked a 21% year-over-year increase.

Investors can expect modest but continued growth in 2022 and 2023, after the $3.59 per share earned last year. EPS is now projected to increase to $3.79 this year and $4.29 in 2023.

Fee-Based Contracts Ensure Dividend Stability

Many energy companies have reported high growth rates in 2022, driven by the historic surge in pricing.

However, Oneok’s earnings may grow slower than its peers because it engages services through fee-based contracts that even out price fluctuations. These contracts typically have escalation clauses based upon CPI inflation numbers, rather than energy prices.

This payment structure can miss out on potential growth but provide better stability for the company, amid highly-volatile energy prices. This, in turn, makes the dividend more dependable.

In addition, Oneok’s debt is investment grade, rated “BBB” by S&P Global.

OKE stock currently has an IBD Composite Rating of 91.

As energy prices have moderated, this dividend stock has gapped below its 200-day line. The stock is currently in a double-bottom pattern that shows a 69.82 buy point, although it’s well off that level right now.

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