Updated 3/11/2025
ONE Gas, Inc. (NYSE: OGS) is a regulated natural gas utility serving over 2.2 million customers across Oklahoma, Kansas, and Texas. Spun off from ONEOK in 2014, it has established itself as a reliable player in the utility space, benefiting from predictable revenues and steady demand.
For dividend investors, OGS presents an interesting opportunity. The company offers a stable payout, a respectable yield, and a history of consistent increases. But, as with any stock, there are factors to weigh—such as debt levels, cash flow, and regulatory risks. Let’s take a closer look at how ONE Gas stacks up for income-focused investors.
🔑 Key Dividend Metrics
💰 Forward Dividend Yield: 3.64%
📈 5-Year Average Yield: 3.29%
📅 Next Dividend Date: March 7, 2025
🚨 Payout Ratio: 67.52%
💵 Dividend Growth Streak: 10+ years
📊 Last Dividend Increase: 1.5%
📊 Dividend Growth (5-year CAGR): ~6%
Dividend Overview
ONE Gas has been a reliable dividend payer, currently offering a yield of 3.64%, which sits slightly above its five-year average. This makes it an appealing choice for income investors looking for stability rather than sky-high payouts. Compared to other utilities, it falls within a comfortable range—not the highest yield out there, but still respectable for a regulated company.
The latest quarterly dividend stands at $0.67 per share, reflecting a modest increase. While this bump keeps the company’s streak of annual dividend hikes alive, the rate of growth has slowed in recent years. That could signal a more conservative approach from management, likely due to capital expenditure needs and cash flow considerations.
Utilities like OGS are known for their steady dividends, as their business model is relatively insulated from economic swings. That reliability is a key attraction for long-term dividend investors.
Dividend Growth and Safety
Dividend safety is a crucial factor when evaluating an income stock. At a 67.52% payout ratio, OGS is distributing a significant portion of its earnings to shareholders, but it remains within a manageable range. Utilities tend to have higher payout ratios than other sectors due to their stable earnings, so this number isn’t a red flag—though it does limit flexibility for future increases.
The company has averaged around 6% annual dividend growth over the past five years, but the most recent increase of just 1.5% raises some eyebrows. That’s well below its historical pace, which could indicate a shift in priorities. If future increases remain this small, it may mean the company is prioritizing debt management or infrastructure spending over dividend growth.
Cash flow is another consideration. OGS is currently running a negative free cash flow of -$437 million, meaning it’s not generating enough excess cash to cover both its capital expenditures and dividend payments. While this isn’t uncommon for utilities, which rely on financing for growth, it does mean investors should keep an eye on whether free cash flow improves in the coming years.
Chart Analysis
Price Action and Moving Averages
The price of ONE Gas, Inc. (OGS) has been in an overall uptrend since mid-2024, but with some notable pullbacks along the way. The 50-day moving average (light blue line) is trending above the 200-day moving average (dark blue line), which generally suggests a bullish setup.
Recently, the price has been hovering around the 73.50–75 range, showing some resistance near this level. The last trading session closed at 73.53, just below the recent highs, indicating some hesitation from buyers. The fact that the stock attempted to push higher intraday but ended lower suggests that sellers stepped in.
Volume Trends
Trading volume for the latest session was around 386,000 shares, which appears to be in line with recent averages. There have been notable volume spikes in previous months, especially during sharp price movements, but the current volume does not indicate a major shift in sentiment.
Higher volume green bars in some recent sessions indicate that buying interest has been present, but the lack of sustained volume spikes suggests that strong momentum may not be fully in place yet. If volume picks up along with upward price movement, it could indicate a more decisive breakout.
Relative Strength Index (RSI)
The RSI indicator, plotted at the bottom, is hovering in a neutral zone, suggesting that the stock is neither overbought nor oversold. In recent months, RSI has trended upward, moving away from oversold conditions. This signals that buying pressure has been increasing, but the stock has not yet reached extreme levels where a pullback would be expected.
If RSI starts approaching 70, it could indicate that the stock is getting overbought, potentially leading to a short-term reversal. On the other hand, if it dips below 50, it might suggest weakening momentum.
Recent Candlestick Action
Looking at the last five candlesticks, there are signs of some indecision in the market. The wicks on both ends of recent candles suggest that the stock has attempted to push higher but faced resistance. This could mean that buyers are still active, but sellers are stepping in near the recent highs.
If the stock can break above its recent high with strong volume, it may continue moving upward. However, if it fails to hold above its current level and dips below the 50-day moving average, it could signal some short-term weakness.
Analyst Ratings
📈 Recent Upgrades
On September 11, 2024, Wells Fargo upgraded ONE Gas, increasing their price target to $80. 🔼 This optimistic shift was driven by the company’s steady earnings growth and strong financial position, making it an attractive option within the utility sector. Analysts pointed to its regulated business model, which provides predictable revenue, as a key factor supporting the upgrade.
📉 Recent Downgrades
On December 6, 2024, Ladenburg Thalmann downgraded ONE Gas, lowering their price target to $75.50. 🔽 The downgrade stemmed from concerns about the company’s elevated debt levels and the impact of rising interest rates, which could increase borrowing costs and pressure margins. Analysts expressed caution about how the company will balance capital expenditures with maintaining its dividend.
🎯 Consensus Price Target
As of March 2025, the average 12-month price target among 14 analysts sits at $73.83. 📊 This consensus reflects a neutral stance, suggesting that analysts see limited upside potential in the near term. While some expect stability and moderate growth, others remain cautious about external factors such as rate hikes and regulatory conditions.
These mixed ratings highlight the balance between ONE Gas’s solid financial foundation and the macroeconomic pressures it faces. Investors weighing income stability against potential interest rate risks will find these insights useful when assessing the stock’s future performance.
Earnings Report Summary
ONE Gas wrapped up the fourth quarter of 2024 with earnings per share coming in at $1.34, right in line with what analysts had expected. That brought full-year earnings to $3.91 per share, showing steady performance despite some revenue challenges.
Revenue for the quarter landed at $630.7 million, which was noticeably below estimates of $973.6 million. While missing revenue expectations isn’t ideal, the fact that the company still met earnings projections suggests they managed expenses well and kept margins in check.
Looking ahead to 2025, the company expects net income to fall between $254 million and $261 million, translating to earnings per share between $4.20 and $4.32. That midpoint of $4.26 suggests a modest step up from last year. The main drivers of this growth include new rate adjustments and continued customer expansion, though these will be partially offset by rising operating costs, higher depreciation from capital projects, and increased interest expenses.
ONE Gas is planning to invest about $750 million into infrastructure projects in 2025, with a major focus on system integrity and replacement efforts. About $180 million of that will go toward expanding service to new customers, especially in Texas and Oklahoma, where demand remains strong. The company’s expected average rate base for the year is projected to reach $5.8 billion, reflecting its ongoing investment in system growth and reliability.
For dividend investors, there’s a cautious but steady outlook. The company aims to grow its dividend at an annual rate of 1% to 2% through 2029, keeping its payout ratio between 55% and 65% of net income. This suggests a balanced approach—rewarding shareholders with steady income while maintaining enough financial flexibility for future investments.
Despite some revenue softness, ONE Gas delivered a solid quarter with earnings stability. Their focus on long-term infrastructure improvements and customer growth should support continued financial strength. The measured approach to dividend growth signals a commitment to keeping the company financially sound while still offering steady returns to shareholders.
Financial Health and Stability
A company’s financial strength plays a huge role in its ability to sustain dividends long-term. Looking at ONE Gas’s balance sheet, there are a few things to note.
🔹 The company carries $3.35 billion in total debt, giving it a debt-to-equity ratio of 107.76%. This is on the higher side, though not unusual for a utility, as these businesses rely heavily on borrowing to fund infrastructure projects. However, in a rising interest rate environment, higher debt loads can put pressure on earnings.
🔹 Profitability remains stable, with a 10.7% profit margin and a 19.9% operating margin. These numbers indicate that OGS is running efficiently and maintaining healthy margins, which supports its ability to pay dividends.
🔹 Liquidity is somewhat of a concern. The company has a current ratio of 0.64, meaning its short-term assets don’t fully cover its short-term liabilities. While utilities often operate with lower liquidity due to their stable revenue streams, it’s something to watch, especially if cash flow remains tight.
Overall, the company is financially sound but carries a bit more debt than some investors might like. If interest rates remain elevated, higher borrowing costs could impact earnings, making dividend growth even more conservative.
Valuation and Stock Performance
At its current price of $72.60, ONE Gas trades at a trailing price-to-earnings (P/E) ratio of 18.81 and a forward P/E of 17.45. These valuations suggest the stock is fairly priced, neither deeply discounted nor particularly expensive compared to historical levels.
Looking at its stock performance, OGS has moved within a 52-week range of $58.31 to $78.89, currently sitting in the middle of that band. The stock is up 18.14% over the past year, which is a strong performance relative to the S&P 500’s 7.87% gain during the same period.
Recent moving averages point to a slightly bullish trend, with the 50-day moving average at $71.37 and the 200-day moving average at $69.74. This suggests the stock has some momentum behind it, though not at an extreme level.
For investors looking for an income-focused utility stock, ONE Gas offers reasonable value at these levels. It’s not a bargain, but it’s also not overextended in terms of valuation.
Risks and Considerations
No stock is without risks, and while OGS has some attractive qualities, there are a few areas of concern.
📉 Interest Rate Sensitivity – Utilities are heavily impacted by interest rate changes. Higher rates make borrowing more expensive, which can cut into earnings and limit future dividend growth.
💰 Negative Free Cash Flow – The company’s current free cash flow is in the red, meaning it relies on debt or equity financing to maintain its dividend. If this persists, it could slow future payout increases.
⚡ Regulatory Risks – Since OGS operates in a regulated industry, state commissions control its rate adjustments. Any unfavorable rulings could limit revenue growth.
💸 Slowing Dividend Growth – While the company still raises its dividend, recent increases have been much smaller than in past years. If this trend continues, income investors may need to adjust their expectations.
These aren’t dealbreakers, but they are important factors to weigh when considering OGS as a long-term dividend investment.
Final Thoughts
ONE Gas is a solid choice for investors seeking a stable dividend from the utility sector. It offers a respectable 3.64% yield, a history of reliable payouts, and a relatively predictable business model. However, some caution is warranted due to its high debt load, negative free cash flow, and slowing dividend growth.
For those prioritizing consistency over high growth, OGS still fits the bill. But if the company’s financials don’t improve, particularly in terms of free cash flow, future dividend hikes may remain small.
At its current valuation, the stock is reasonably priced, making it a potential addition for income investors who value stability over rapid capital appreciation. Long-term, its performance will largely depend on how well management balances cash flow, debt, and shareholder returns.
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