Energy stocks have their ups and downs, just like every other sector. It’s a complicated business with a lot of different players, but there’s certainly money to be made. Here’s what you need to know about investing in natural gas.
What Are the Best Natural Gas Stocks To Buy?
If you’re looking to invest in natural gas stocks, here are 10 of the best options to consider for your portfolio:
- DCP Midstream LP (DCP.PC)
- Ovintiv Inc. (OVV)
- Coterra Energy Inc. (CTRA)
- EQT Corp. (EQT)
- Southwestern Energy Co. (SWN)
- Tellurian Inc. (TELL)
- Antero Resources Corp. (AR)
- Noble Corp. (NE)
- Kinder Morgan Inc. (KMI)
- Kimbell Royalty Partners LP (KRP)
Best Value Natural Gas Stocks
If you’re looking for value stocks — those that produce income for investors in the form of a dividend — there are a few in the natural gas industry. Here are three to consider.
1. DCP Midstream LP (DCP.PC)
- Stock price as of June 28: $25.48
- Market cap: $6.783 billion
DCP Midstream LP produces and markets natural gas liquids and processes natural gas. As a midstream company, it doesn’t explore or produce natural gas; rather, it transports, stores and markets it. DCP Midstream LLC, which owns DCP Midstream LP, is a joint venture between Phillips 66 and Enbridge.
2. Ovintiv Inc. (OVV)
- Stock price as of June 28: $36.31
- Market cap: $10.033 billion
Ovintiv Inc. produces natural gas, natural gas liquids, oil and condensate. The company touts its commitment to generating free cash flow and returning money to shareholders. In September 2021, Ovintiv announced a buyback of up to 26 million shares. In September 2022, the company announced in a press release that it had received regulatory approval for the renewal of the buyback program.
It also has a dividend yield of 3.35%. According to Nasdaq, the consensus among 20 analysts who watch the stock is that Ovintiv is a “strong buy.”
3. Coterra Energy Inc. (CTRA)
- Stock price as of June 28: $24.47
- Market cap: $18.535 billion
Coterra Energy Inc. is an upstream oil and gas company that was created by the merger of Cabot Oil & Gas and Cimarex Energy. It currently has projects in the Permian Basin in West Texas and southeast New Mexico, Marcellus Shale in northeast Pennsylvania and Anadarko Basin in western Oklahoma.
Coterra Energy stock closed at $24.47 on June 28 but has a one-year average target estimate of $30.38. Its dividend yield is 8.85%.
Growth stocks are those that tend to make money for investors because they appreciate in price over time, compared to value stocks that generate income. When looking at growth stocks, you want to choose those that will grow faster than the overall economy. Here are some natural gas growth stocks to consider.
4. EQT Corp. (EQT)
- Stock price as of June 28: $39.76
- Market cap: $14.379 billion
EQT Corp. is the largest producer of natural gas in the United States. The company is focused on replacing international coal with domestic natural gas in order to address climate change.
EQT closed at $39.76 on June 28 and has a one-year target estimate of $43.27 per share.
5. Southwestern Energy Co. (SWN)
- Stock price as of June 28: $5.75
- Market cap: $6.332 billion
Southwestern Energy Co. is a natural gas exploration and production company. The company focuses on developing natural gas and natural gas liquids in Pennsylvania, Ohio, West Virginia and Louisiana. It also transports oil, natural gas and natural gas liquids.
6. Tellurian Inc. (TELL)
- Stock price as of June 28: $1.35
- Market cap: $759.792 million
The stock closed at $1.35 per share on June 28, making it inherently risky due to its low price. But analysts seem to like it, giving it a consensus “buy.”
7. Antero Resources Corp. (AR)
- Stock price as of June 28: $22.12
- Market cap: $6.639 billion
Antero Resources Corp. is an exploration and production company for natural gas, natural gas liquids and oil in the Appalachian Basin. It provides midstream services through Antero Midstream.
Best Momentum Natural Gas Stocks
Momentum stocks are those that are going on an upward trajectory and are expected to continue to do so. These stocks are doing well, and that should continue.
8. Noble Corp. (NE)
- Stock price as of June 28: $37.66
- Market cap: $5.221 billion
Noble Corp. is one of the world’s largest offshore drilling contractors. Although it’s trading closer to its 52-week high than its 52-week low, analysts give it a “strong buy” rating.
They predict it’ll rise from its most recent closing price of $37.66 on June 28 to $53 within the next year.
9. Kinder Morgan Inc. (KMI)
- Stock price as of June 28: $17.01
- Market cap: $38.25 billion
Kinder Morgan Inc. is one of the largest U.S. energy infrastructure companies, with pipelines that transport natural gas, crude oil, gasoline and carbon dioxide. Its terminals store renewable fuels, chemicals, petroleum and other products.
10. Kimbell Royalty Partners LP (KRP)
- Stock price as of June 28: $14.23
- Market cap: $1.346 billion
Kimbell Royalty Partners is an exploration and production company, but rather than perform those functions itself, it buys and holds royalty interests in U.S. oil and natural gas properties.
The stock pays a dividend yield of 12.76%. Just four analysts watch the stock, but two rate it a “strong buy” and the other two rate it a “buy,” with an average target price of $21.50 — 51% above its closing price of $14.23 on June 28.
How To Invest In Natural Gas
There are four primary ways to invest in natural gas: exchange-traded funds, master limited partnership stocks, individual stocks and futures. For the average investor, the easiest way is likely in ETFs or individual stocks. Exchange-traded funds offer the opportunity to let a manager run your natural gas portfolio for you, while individual stocks put you more in control.
Overall, natural gas stocks have generally been falling in 2023. Prices for natural gas tend to fall in spring and autumn, so if that also depresses share prices, it could be a good time to pick them up.
Investing In Natural Gas Stocks
Natural gas is formed deep in the earth and contains methane, natural gas liquids and nonhydrocarbon gases. Like oil, natural gas needs to be extracted from the ground, processed and transported to homes and businesses where it is used to heat and cool.
The companies that provide natural gas are divided into three categories. Upstream companies, otherwise known as exploration and production companies, find the gas and get it out of the ground. Midstream companies process the gas and move it from the well to the downstream companies, which distribute it to consumers.
If you’re wondering how you can invest in natural gas, you have a lot of options. You can choose from companies in different parts of the process — upstream, midstream or downstream. Or you can choose based on the type of stock — value, growth or momentum.
Is There a Natural Gas ETF?
If you’re looking for the single best position in the natural gas industry, well, it may not be a natural gas stock at all. The First Trust Natural Gas ETF (FCG) is a natural gas exchange-traded fund that tracks the ISE-Revere Natural Gas Index. Investors in this fund own a little bit of 51 different stocks, 99.92% of which are energy stocks, according to Yahoo Finance. So if you want to participate in the natural gas industry but don’t want to have to decide on a single stock, this might be worth a look.
Whether you choose a specific natural gas stock — or two, or three — or decide to invest in an ETF, adding natural gas positions to your portfolio could be a wise move.
Data is accurate as of June 28, 2023, and is subject to change. Information on analyst ratings was sourced from Yahoo Finance and Nasdaq.
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