10 Best Natural Gas Stocks To Invest in for July 2024

Energy stocks have their ups and downs, just like every other sector, but natural gas stocks have proven more resilient than crude oil and other energy commodities. It’s a complicated business with a lot of different players, but there’s certainly money to be made with the right investments. 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:

1. Phillips 66 (PSX)
2. Ovintiv Inc. (OVV)
3. Coterra Energy Inc. (CTRA)
4. EQT Corp. (EQT)
5. Southwestern Energy Co. (SWN)
6. Tellurian Inc. (TELL)
7. Antero Resources Corp. (AR)
8. Noble Corp. (NE)
9. Kinder Morgan Inc. (KMI)
10. 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. Phillips 66 (PSX)

Phillips 66 is an oil and gas refining and marketing company with four business segments covering midstream, chemicals, refining and marketing and specialties.

In June 2023, Phillips 66 completed its acquisition of DCP Midstream LP, which produces and markets natural gas liquids and processes natural gas. Since then, it has announced agreements to acquire Pinnacle Midland in a $550 million cash deal that will strengthen Phillips’ natural gas processing capacity in a region of vital importance to the U.S. natural gas industry.

PSX shares have faltered lately after a long upward trend, and the company missed analysts’ earning forecasts in the first quarter of 2024. However, Phillips 66 is still in the midst of a three-year capital improvement plan, announced in 2022 and designed to return more money to shareholders through stock buybacks and increased dividends, which currently yield 3.30%.

The consensus rating for PSX is “strong buy,” and the price target is $158.79.

2. Ovintiv Inc. (OVV)

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. The program was renewed most recently in September 2023 for repurchases through October 2024. Ovintiv also distributes dividends, which currently yield 2.58%.

In the first quarter of 2024, Ovintiv’s $1.44 earnings per share beat analyst estimates by $0.12. Shares are up 7.5% year to date and over 30% over the past 12 months. Analysts expect the trend to continue — they rate OVV a “strong buy.” They forecast over 33% growth in share prices in the next 12 months.

3. Coterra Energy Inc. (CTRA)

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. Marcellus Shale was responsible for 78% of Coterra’s natural gas production in 2023.

Coterra Energy shares have performed well so far this year, gaining 5.13%. The stock is up 10.55% over the past year, but it still appears to be a good value. The dividend yields 3.13%.

Analysts like the stock. It has a “strong buy” rating and a price target of $34.47, which is 28.4% higher than the current share price.

Best Growth Natural Gas Stocks

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’ll 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)

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. In a move toward that end, EQT announced in March that it will acquire Equitrans Midstream, creating “America’s only large-scale, vertically integrated natural gas company prepared to compete on the global stage,” according to a press release.

EQT gets a “buy” rating from analysts, and the consensus price target is $44.53%, representing 19% upside. But the real news is the projected earnings growth — 248.57%, from $1.05 to $3.66, according to MarketBeat.

5. Southwestern Energy Co. (SWN)

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.

In a $7.4 billion all-stock deal announced in January, Southwestern Energy and Chesapeake Energy joined forces to become one of America’s largest natural gas producers, AP reported at the time.

Not surprising considering the uncertainty mergers bring, analysts rated SWN a “hold” earlier this year and scored it slightly below oil and energy companies overall. They since have upgraded the stock to “buy,” based at least in part on Southwestern’s 23% upside. Analysts are also optimistic about earnings, projecting 89.83% growth.

6. Tellurian Inc. (TELL)

Tellurian Inc. is an upstream natural gas company with over 400 drillable locations. It produced 19.5 billion cubic feet of natural gas in the third quarter of 2023 alone, according to a February Securities and Exchange Commission filing.

With a share price below $1, TELL is an extremely risky stock, and considering its 3.34 price/sales ratio, it’s not particularly cheap. Analysts aren’t giving up on it yet, however. They rate it a “buy” and predict share prices to increase over 100% in the next year. They also expect earnings to grow, although in this case “growth” means slowing negative growth. Investors might have to hold onto TELL for a long time to see an appreciable return, but at 75 cents per share, it might be worth the risk.

7. Antero Resources Corp. (AR)

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.

AR’s sky-high P/E ratio is likely to give most investors pause, but the stock is getting positive attention from Wall Street. S&P Global Ratings gave it an investment-grade BBB credit rating and upgraded its corporate and issuer credit ratings to BBB with a stable outlook, according to Marcellus Drilling News. What’s more, Goldman Sachs increased its price target from $32 to $36 and rated AR a buy, according to MarketBeat, citing a research note reported by Benzinga. Wells Fargo and JPMorgan Chase also have increased their price targets.

Antero has a “moderate buy” consensus rating, as reported by MarketBeat, and a consensus price target of $33, which is 1% less than its current share price. Needless to say, this is a high-risk stock. However, the earnings forecast is for astronomical 669.44% growth. That prediction might be driving the large investment firms’ positive sentiment.

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)

Noble Corp. is one of the world’s largest offshore drilling contractors following its 2022 merger with Maersk Drilling.

Although Noble shares are down in 2024, they’re still up 18% for the year, and analysts expect an upward trend over the next year. The price target is currently $59, and analysts project 49.16% earnings growth. They rate NE a “strong buy.”

9. Kinder Morgan Inc. (KMI)

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.

KMI has a consensus rating of “buy,” as reported by Nasdaq, based on 19 analyst recommendations. The consensus price targets is modest, at $21.09, as are earnings growth projections — 3.39%. But slow and steady is what investors look for in momentum stocks, and this one could fit the bill.

10. Kimbell Royalty Partners LP (KRP)

Kimbell Royalty Partners is an exploration and production company; however, rather than perform those functions itself, it buys and holds royalty interests in U.S. oil and natural gas properties.

The stock pays an impressive dividend yield of 11.15%. While a high dividend can be a red flag, it doesn’t appear to be in this case. Analysts strongly recommend buying this stock. They predict a 19% increase in share prices over the next 12 months and expect earnings to grow nearly 38%.

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.

Individual stocks give you complete control over the investments in your portfolio, but they’re risky — if all your eggs are in one basket and that basket fails, you lose all your eggs.

Exchange-traded funds offer the opportunity to let a manager run your natural gas portfolio for you. The funds also provide automatic diversity in your natural gas holdings, and you can add other types of energy stocks to diversify holdings across the energy sector. The energy sector makes up about 3.9% of the S&P 500 index, according to S&P Dow Jones Indices. You can use that as a guide for determining how to allocate your own assets.

The First Trust Natural Gas ETF (FCG) is one example of a natural gas ETF. It tracks the ISE-Revere Natural Gas Index and exposes investors to 44 different stocks. 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.

Investing in Natural Gas Stocks

Natural gas is formed deep in the earth and contains methane, natural gas liquids and non-hydrocarbon 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 to invest in stocks issued by natural gas companies, 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.

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.

John Csiszar and Karen Doyle contributed to the reporting for this article.

Data is accurate as of June 28, 2024, and is subject to change. Information on analyst ratings was sourced from Yahoo Finance and Nasdaq.

This article originally appeared on GOBankingRates.com: 10 Best Natural Gas Stocks To Invest in for July 2024