The election of Donald Trump to another term in the White House is widely seen as a win for the oil and natural gas industry.
“Natural gas production will continue to skyrocket in the Trump administration’s effort to produce more oil,” says Jason DeLorenzo, owner and principal of Ad Deum Funds, a registered investment advisor specializing in options and volatility trading. “With that comes natural gas as a byproduct.”
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For natural gas in particular, Trump is expected to promote building more export facilities to send the fuel to Europe and Asia via ship in its super-chilled liquid form.
Another key source of demand for natural gas is expected to come as the economy increasingly relies on electricity for transportation, industrial processes and household uses. There’s also a new player in town: energy-intensive artificial intelligence.
Natural gas is expected to be a key bridge between outgoing coal-fired electricity generation and intermittent renewables. Investors interested in companies involved with that bridge fuel can consider these stocks and funds:
| Natural Gas Stock/Fund | Forward Dividend Yield* |
| Energy Transfer LP (ticker: ET) | 6.7% |
| Kinder Morgan Inc. (KMI) | 4.3% |
| Sempra (SRE) | 2.8% |
| Cheniere Energy Inc. (LNG) | 0.9% |
| Flex LNG Ltd. (FLNG) | 13.5% |
| First Trust Natural Gas ETF (FCG) | 3.3% |
| United States Natural Gas Fund LP (UNG) | 0.0% |
*As of the market close on Dec. 12. Source: Dividend.com.
Energy Transfer LP (ET)
Pipeline companies like Energy Transfer are crucial links between oil and gas fields and refiners.
This midstream energy company focuses on transporting, storing and terminaling natural gas, crude oil, natural gas liquids, refined products and liquid natural gas.
“I would stay away from natural gas production companies since the Trump administration will be more pipeline-friendly and reduce regulations surrounding that,” says DeLorenzo. “For that reason, (Kinder Morgan Inc.) KMI and ET, two pipeline companies with high dividend yields, would be a better place to invest.”
Energy Transfer yielded 6.7% as of Dec. 12 and has increased its dividend for three consecutive years, according to Dividend.com.
Kinder Morgan Inc. (KMI)
Kinder Morgan is an energy infrastructure company yielding 4.3% as of Dec. 12 and has increased its payout for eight consecutive years.
This company runs major natural gas pipeline and storage systems; natural gas gathering systems and processing and treating facilities; natural gas liquids fractionation facilities and transportation systems; and LNG regasification, liquefaction and storage facilities.
The company has said it expects natural gas demand to grow on the back of growing liquefied natural gas exports, exports to Mexico and power generation.
Sempra (SRE)
“I also like LNG export companies such as SRE and (Cheniere Energy Inc.) LNG, since Donald Trump will likely accelerate LNG port construction,” says DeLorenzo.
Because natural gas in North America is cheaper than that in Asia and Europe, companies have begun to export the fuel by ship in an ultra-chilled liquid form.
Liquefied natural gas, or LNG, for export is one area where demand for U.S. natural gas is expected to grow in coming years. It’s already proven to be a lifeline to Europe as the continent tries to wean itself from Russian energy sources after the invasion of Ukraine.
Demand for LNG stands to benefit Sempra, which develops, builds, operates and invests in energy infrastructure, including LNG facilities and development projects.
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Cheniere Energy Inc. (LNG)
The U.S. is the biggest natural gas-producing country in the world, and it also exports the most LNG. Cheniere Energy — which operates LNG terminals and liquefaction projects — is the biggest U.S. LNG exporter. The company has one of the biggest liquefaction platforms in the world, with facilities in Louisiana and Texas, and it says it is also pursuing liquefaction expansion opportunities.
Cheniere has a smaller forward dividend yield of 0.9%, but Cheniere has increased its dividend for three consecutive years. LNG shares are also up 26.8% year to date.
Flex LNG Ltd. (FLNG)
Because there aren’t any natural gas pipelines that span the Atlantic or Pacific oceans, natural gas has to be transported by specialized ships that can load, store and unload the fuel in its cooled liquid form.
Shipping company Flex LNG is one of the favorites of Vince Stanzione, CEO at First Information, a publisher of educational materials related to financial spread betting and derivatives trading.
The company has 13 modern LNG carriers in its fleet, with 11 of them chartered on long-term contracts. Those contracts help reduce pricing volatility for the company, Stanzione says.
“The ships can easily be re-routed to deal with demand,” he says. “Currently Asia has been a large importer of LNG while Europe has been weaker.”
The big appeal for the stock is its hefty dividend, he says. The stock yielded 13.5% as of the market close on Dec. 12. “The dividend looks safe and in fact could slightly increase in 2025,” Stanzione says.
First Trust Natural Gas ETF (FCG)
Investors who want to hedge risk among different companies while still investing in a general theme can turn to exchange-traded funds, or ETFs. These investing vehicles trade under a single ticker symbol just like a stock, but they contain investments in many different companies.
The First Trust Natural Gas ETF tracks an index made up of companies that make most of their money from the exploration and production of natural gas. Its expense ratio is 0.6%.
As a fund of exploration and production companies, FCG may offer a more aggressive way to play the natural gas market compared with utilities, which are often considered defensive assets because they can hold their value better than many other companies in an economic downturn. This is because people are going to need natural gas and electricity regardless of the state of the economy.
Meanwhile, exploration and production companies are considered cyclical investments because they track the ups and downs of economic cycles. And natural gas prices, like those of other commodities, can be quite volatile.
United States Natural Gas Fund LP (UNG)
This is a different type of fund. It doesn’t hold a basket of equities under a single ticker symbol. Rather, it tracks natural gas price movements based on benchmark Henry Hub futures.
Henry Hub is a natural gas pipeline network in Louisiana that serves as a distribution hub for major natural gas markets. Prices there are considered the benchmark for the U.S. natural gas market.
Investing in natural gas as a commodity means investors aren’t making bets on production company management teams or other company-specific factors. It’s also much less of a hassle to buy this fund than it is to trade futures contracts, but you should also understand that it isn’t designed to be held for long periods.
UNG doesn’t take delivery of natural gas. Instead, it rolls over futures contracts. Because futures contracts that expire further out are often more expensive than the one the fund is holding, the fund loses money on that rollover. That doesn’t mean it’s a bad fund; it just means it is designed for expressing views about whether natural gas prices will rise or fall over short periods. You may not want to hold it for longer than one day.
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7 Best Natural Gas Stocks and Funds to Buy originally appeared on usnews.com
Update 12/13/24: This story was previously published at an earlier date and has been updated with new information.
