Hook and thesis
ONEOK (OKE) is a classic midstream setup where steady cash flow meets a near-term catalyst window. The stock yields roughly 5.2%, generates roughly $2.92 billion in free cash flow, and trades at a mid-teens P/E and an EV/EBITDA near 11x. Those numbers alone make the company interesting for income-oriented investors. Layer on a sector-wide natural gas rally after the 01/23/2026 cold wave and recent commentary that acquisition integration benefits are material, and you get a practical, actionable trade.
My core thesis: buy OKE with a defined stop and target because (1) near-term commodity stress is favoring gas midstream pricing and volumes, (2) the combined company is beginning to convert acquisition-related promises into cash-flow improvements, and (3) the yield plus relatively conservative valuation give a favorable risk/reward for a mid-term trade. Below I give the trade entry, stop, target and time-horizon management plan and explain the underlying fundamentals and risks.
Business overview - what ONEOK does and why the market should care
ONEOK is a U.S. midstream company focused on gathering, processing and transporting natural gas and natural gas liquids (NGLs). The business spans the Williston, Powder River and DJ basins on the Rocky Mountain side, and the Mid-Continent and Gulf Coast market centers (Conway and Mont Belvieu) for NGLs. That footprint links production basins to petrochemical and export markets, providing fee-based and commodity-exposed revenue streams.
Why investors should care: midstream companies like ONEOK combine predictable cash flow from long-term contract volumes with occasional upside when commodity prices spike or volumes reroute. ONEOK's cash generation (free cash flow of about $2.92 billion) supports a high dividend (about 5.2%) and gives the company firepower to pay down acquisition-related debt or buy back shares as earnings normalize.
Supportive numbers
| Metric | Value |
|---|---|
| Current price | $80.16 |
| Market cap | $50.4B |
| Free cash flow | $2.92B |
| Dividend yield | ~5.2% |
| P/E | ~14.6 |
| EV/EBITDA | ~11.2x |
| Debt / Equity | ~1.55x |
Those numbers argue for a company that is reasonably valued given the steady cash flow profile and the yield. Return on equity near 15% and return on assets around 5% show operational profitability that supports the payout. The balance sheet is levered - debt to equity sits around 1.55x - but the company is producing substantial free cash flow that can be directed to debt reduction or shareholder returns.
Top 3 reasons to buy ONEOK right now
- Weather-driven natural gas rally is a short-term earnings tailwind: A record cold wave that hit 40 U.S. states led natural gas futures to surge in late January 2026 (news 01/23/2026), increasing heating demand and creating deliverability stress. That kind of event boosts throughput and NGL volumes in the near term, and midstream companies tend to benefit via higher fee revenue and improved utilization.
- Real cash flow to support the dividend and deleveraging: ONEOK reported free cash flow around $2.92 billion. With a 5%+ yield and a history of steady dividends, the company has room to both maintain payouts and accelerate debt paydown after integration costs subside. One industry write-up published 01/12/2026 suggested meaningful cost synergies and tax benefits from recent acquisitions, which if realized would materially improve FCF conversion.
- Valuation is constructive relative to cash generation: With market cap near $50.4 billion, P/E around 14.6 and EV/EBITDA roughly 11.2x, OKE is priced below many higher-growth energy names. For an income-oriented midstream company with strong cash flow, that multiple is attractive—especially when combined with a 5%+ yield.
Catalysts to drive shares higher (2-5)
- Continued winter cold snaps or near-term supply disruptions that support sustained natural gas price strength and higher throughput volumes.
- Quarterly results or management commentary confirming >$500M in merger synergies and improved FCF guidance (market appears to be pricing in only part of these benefits).
- Progress on debt reduction or announcements of opportunistic share buybacks once integration cash flows stabilize.
- Ex-dividend date on 02/02/2026 and payable date 02/13/2026, which can draw income buyers into the name in the short-term trading window.
Trade plan - entry, stop, target, and timing
Direction: Long
Entry price: $80.16
Stop loss: $74.00
Target price: $90.00
Risk level: Medium
Horizon: mid term (45 trading days)
Rationale: Entering at $80.16 picks up the trade near current levels and captures the upcoming ex-dividend window and early readouts from winter demand. The stop at $74.00 limits downside to roughly 7.7% from entry and sits beneath recent intermediate support (the 50-day SMA and psychologically important $75 area). The $90 target reflects a re-rating toward a higher multiple as integration benefits and winter-driven volume improvements are digested - it is roughly a 12% upside from entry and still conservative relative to the stock's 52-week high of $103.64.
Time management across horizons:
- Short term (10 trading days): This trade may already show gains if winter-related price action keeps gas markets elevated and the stock captures dividend buyers ahead of 02/02/2026. Tighten stops to breakeven after a 4-5% move higher.
- Mid term (45 trading days): My primary horizon. Expect the market to price in integration progress, FCF improvements and the tailwind from the winter demand spike during earnings or quarterly cadence.
- Long term (180 trading days): If the company demonstrates sustained FCF improvements and debt reduction, reassess targets and consider transitioning to a position trade for yield capture; otherwise, exit into strength.
Valuation framing
On a headline basis ONEOK trades at roughly 14.6x earnings and ~11.2x EV/EBITDA. For a midstream company with near-term cash certainty from contracted volumes and notable free cash flow, those multiples look reasonable and slightly discount the potential upside from realized synergies. The ~5.2% dividend yield is well above the market average, which provides a yield cushion while waiting for multiple expansion or cash flow improvement.
Without comparing direct peers here, think of valuation in practical terms: you are buying a business that produces nearly $3B in free cash flow on a market cap near $50B. If FCF conversion and deleveraging accelerate, the market should be willing to pay a multiple premium for visible returns to shareholders.
Risks and counterarguments
- Commodity volatility cuts both ways: The same cold snap that helps volumes can reverse quickly. If natural gas prices collapse post-winter or if freeze-offs normalize without sustained higher prices, the throughput and fee upside may be short-lived.
- Execution risk on integration: ONEOK has taken on acquisition-related debt and integration complexity. If synergies are slower to materialize or costs run higher than expected, leverage could remain elevated and constrain buybacks or dividend increases.
- Leverage and interest-rate sensitivity: Debt-to-equity around 1.55x means the company is levered; rising rates or refinancing at higher spreads would hurt earnings and FCF. Even with strong cash flow, leverage creates headline risk.
- Regulatory and pipeline-specific risks: Midstream infrastructure faces permitting, regulatory and commodity-flow risks. Bottlenecks, contractual disputes, or changes in regional supply/demand dynamics could reduce utilization.
- Market multiple compression: If energy and utility multiples compress broadly, OKE's valuation could fall even if fundamentals remain stable.
Counterargument: Critics will point out the 26.8% decline in 2025 and argue the company still carries too much acquisition-related debt. That is valid. If the company does not convert promised synergies into visible cash in the next couple of quarters, the market will remain skeptical and the stock could underperform. That outcome would invalidate the trade thesis and merit exiting or flipping to a shorter-term trade.
What would change my mind
I would reassess the buy recommendation if one or more of the following occurs: management fails to present a clear, near-term path to debt reduction or synergy realization; free cash flow guidance materially misses expectations; or natural gas fundamentals deteriorate sharply such that throughput and NGL volumes drop for multiple quarters. Conversely, faster-than-expected deleveraging, a confirmed plan for buybacks, or recurring commodity-driven volumes would reinforce the bullish case and justify holding past the $90 target.
Conclusion - clear stance
For a mid-term trade I am bullish on OKE. The combination of a 5%+ yield, nearly $3B in free cash flow, a reasonable valuation and timely catalysts (winter gas strength, integration synergies, ex-dividend activity) creates a favorable risk/reward. Enter at $80.16, stop at $74.00, target $90.00, and plan for a 45-trading-day window while tightening risk if you get a quick, profitable move. Keep position sizing modest given leverage and commodity exposure.
Key dates to watch
- Ex-dividend: 02/02/2026
- Dividend payable: 02/13/2026
- Natural gas storylines and weather updates around late Jan/Feb 2026 (see the 01/23/2026 natural gas price spike coverage)