In this article, we discuss 11 best natural gas dividend stocks to buy. You can skip our detailed analysis of the energy sector and the outlook for natural gas, and go directly to read 5 Best Natural Gas Dividend Stocks To Buy.
In 2023, energy stocks in the US experienced a significant and abrupt downturn. This decline was a significant change from the prior year when the energy sector was leading the way in the S&P 500 index. However, the energy industry transformed into one of the worst-performing sectors last year, trailing behind only utility stocks in terms of decline. The S&P 500 Energy index fell by over 4%, standing in stark contrast to the overall performance of the S&P 500, which registered a substantial gain of 24% during the same period.
In addition to this, U.S. natural gas futures saw a significant drop in 2023, marking the most substantial percentage decline since 2006. This decline was primarily attributed to several factors, including exceptionally high production levels, abundant reserves, and a mild winter season. The prices of natural gas experienced a sharp fall throughout 2023, notably contrasting the levels seen in 2022, where they had reached approximately $10 per million British thermal units (mmBtu). This decrease followed the disruptions caused by the Russia-Ukraine war, which had driven prices upward in the previous year.
That said, data tracking LNG tankers revealed that the US reached unprecedented monthly and yearly highs in liquefied natural gas exports in December. Analysts noted this surge in exports poised the U.S. to surpass both Qatar and Australia, potentially securing its position as the top LNG exporter in 2023. According to Alex Munton, who heads global gas and LNG research at the Rapidan Energy Group consulting firm, the US showcased remarkable growth in LNG supply throughout 2023. December specifically saw a significant rise, with 8.6 million metric tons leaving U.S. terminals, highlighting the country's standout performance in the global LNG market.
Analysts are expressing optimism about the energy sector's outlook for 2024. One reason for this positive sentiment is the healthy financial condition of energy companies. Their balance sheets are robust, indicating stability and strength in their financial positions. Additionally, significant players in the industry like Exxon Mobil Corporation (NYSE:XOM) have been increasing the dividends they pay to shareholders. According to Citigroup analyst Scott Gruber, natural gas might have a more favorable outlook compared to oil in the upcoming year. Anticipated increases in gas prices later in 2024 stem from the US efforts to construct export terminals, intending to ship larger quantities of gas to Europe and Asia. This expansion in exports is expected to be beneficial for American gas producers.
Analysts, as per Bloomberg, have set an average price target of $3.35 per million British Thermal Units for natural gas in 2024, indicating potentially significant gains considering the current price hovers around $2.50. Gruber highlights EQT Corporation (NYSE:EQT) and Southwestern Energy Company (NYSE:SWN) as his preferred natural gas stocks for the upcoming year, likely based on their prospects for growth and performance in the evolving market conditions. In this article, we will take a look at some of the best dividend stocks from the natural gas sector.
11 Best Natural Gas Dividend Stocks To Buy
An industrial facility emitting natural gas from large pipes, with workers in the foreground.
Our Methodology:
For this list, we first scanned Insider Monkey’s database of 910 hedge funds, as of the third quarter of 2023. Our focus was on selecting natural gas companies that are involved in the exploration, production, transportation, or distribution of natural gas. From this pool of companies, we identified 11 companies that prioritize distributing dividends to their shareholders and ranked them in ascending order of the number of hedge funds having stakes in them at the end of Q3 2023.
Insider Monkey is an investing website that tracks the movements of corporate insiders and hedge funds. By using a similar consensus approach, we identify the best stock picks of more than 900 hedge funds investing in US stocks. The top 10 consensus stock picks of hedge funds outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). Whether you are a beginner investor or a professional one looking for the best stocks to buy, you can benefit from the wisdom of hedge funds and corporate insiders.
Equinor ASA (NYSE:EQNR) is a multinational energy company that is a significant player in the natural gas industry, participating in the exploration, production, processing, and distribution of natural gas. It is one of the best dividend stocks on our list as the company has been paying regular dividends to shareholders since 2002. The company pays a total cash dividend of $0.90 per share and has a dividend yield of 14.06%, as recorded on January 10.
In the third quarter of 2023, Equinor ASA (NYSE:EQNR) posted revenue of $26.02 billion, which beat analysts' consensus by $860 million. During the quarter, the company generated over $11 billion in operating cash flow. It expects to deliver a total distribution of $17 billion in FY23.
At the end of Q3 2023, 14 hedge funds tracked by Insider Monkey reported having stakes in Equinor ASA (NYSE:EQNR), up from 13 in the previous quarter. The overall value of these stakes is over $40.7 million. Among these hedge funds, Holocene Advisors was the company's leading stakeholder in Q3.
New Fortress Energy Inc. (NASDAQ:NFE) is an American company that is primarily involved in providing energy infrastructure and services, focusing on natural gas and renewable energy solutions. In the first nine months of 2023, the company generated over $537 million in operating cash flow, up from $91 million during the same period last year. During this period, its net income came in at $334 million.
New Fortress Energy Inc. (NASDAQ:NFE), one of the best dividend stocks, offers a quarterly dividend of $0.10 per share. As of January 10, the stock has a dividend yield of 1.08%.
As of the close of Q3 2023, 21 hedge funds in Insider Monkey's database owned stakes in New Fortress Energy Inc. (NASDAQ:NFE), compared with 25 in the previous quarter. The consolidated value of these investments is over $263.8 million.
Energy Transfer LP (NYSE:ET) is involved in the transportation and storage of natural gas, crude oil, refined products, and other related services. The company operates one of the largest and most diversified portfolios of natural gas pipelines in the US. It currently pays a quarterly dividend of $0.3125 per share, having raised it by 0.8% in October this year. The company has been raising its dividends consistently for the past eight quarters, which makes ET one of the best dividend stocks on our list. The stock's dividend yield on January 10 came in at 8.93%.
The number of hedge funds tracked by Insider Monkey owning stakes in Energy Transfer LP (NYSE:ET) stood at 34 in Q3 2023, which remained unchanged from the previous quarter. The total value of these stakes is over $803.2 million. With nearly 18 million shares, Abrams Capital Management was the company's leading stakeholder in Q3.
Enbridge Inc. (NYSE:ENB) is a Canadian energy infrastructure company that specializes in the transportation, distribution, and generation of energy, primarily focusing on transporting crude oil, natural gas, and renewable energy sources. The company reported a strong cash position in the third quarter of 2023, with its operating cash flow coming in at C$3.1 billion, up from C$2.1 billion in the same period last year. Its distributable cash flow for the period came in at C$2.6 billion.
On November 29, Enbridge Inc. (NYSE:ENB) reported a 3% hike in its quarterly dividend to C$0.915 per share. Through this increase, the company stretched its dividend growth streak to 29 years, which makes ENB one of the best dividend stocks on our list. As of January 10, the stock has a dividend yield of 7.34%.
Enbridge Inc. (NYSE:ENB) was a popular stock among elite funds in Insider Monkey's database in the third quarter of 2023, as the company ended the quarter with 35 hedge fund positions, up from 28 in the preceding quarter. The total value of these stakes is over $401 million.
BP p.l.c. (NYSE:BP) is a global energy company that operates in the exploration, production, and distribution of natural gas. The company has substantial investments in natural gas fields and extraction projects in various regions worldwide. It provides a dividend of $0.4362 per American Depositary Share (ADS), equating to a dividend yield of 4.86, as of January 10. BP is one of the best dividend stocks on our list as the company has been paying uninterrupted dividends to shareholders since 1998.
Insider Monkey's database of Q3 2023 showed that 35 hedge funds owned stakes in BP p.l.c. (NYSE:BP), compared with 36 in the previous quarter. These stakes have a total value of more than $2.05 billion.
NiSource Inc. (NYSE:NI) is a utility company operating primarily in the energy sector, providing natural gas and electric services. The company is involved in the distribution of natural gas to residential, commercial, and industrial customers across various regions in the US. It currently offers a quarterly dividend of $0.25 per share and has a dividend yield of 3.68%, as of January 10. The company has been rewarding shareholders with growing dividends for the past 12 years, which makes NI one of the best dividend stocks on our list.
The number of hedge funds in Insider Monkey's database owning stakes in NiSource Inc. (NYSE:NI) jumped to 36 in Q3 2023, from 28 in the previous quarter. The collective value of these stakes is over $1.02 billion. Weiss Asset Management was the company's leading stakeholder in Q3.
