Natural gas prices are changing rapidly due to changes in supply and demand. Since the end of 2008, there has been a significant decline in natural gas prices because of the economic crisis and a decline in natural gas consumption overall. In the near future, economic growth in the world could drive up natural gas demand and prices. Projections show that industrial natural gas demand will increase from 7.3 trillion cubic feet in 2009 to 9.4 trillion cubic feet in 2020.
Here we prepared a list of ten gas utility companies which pay fat dividends regularly. All of the companies in this list have dividend yields of more than 3%, and market-caps of more than $2 billion. These ten stocks averaged a return of 11% (including dividends) in 2011, beating government bonds and the S&P 500.
Market Cap (billions)
National Grid PLC
Integrys Energy Group, Inc.
AGL Resources Inc.
Atmos Energy Corp
AmeriGas Partners LP
Piedmont Natural Gas Co. Inc.
WGL Holdings Inc.
National Grid PLC (NGG) has the largest cap amongst the companies on our list. It also has the third highest dividend yield among the stocks listed above. The stock performed quite well during the past year, returning 16%. NGG has a dividend yield of 6.14%, a forward PE of 21, and an expected EPS growth rate of 4.3%. National Grid operates electricity transmission network and high pressure gas transmission systems in Britain and the United States.
WGL Holdings Inc. (WGL) is the best performing gas utility stock on the list above. It returned 28% over the past year, versus 1.9% for SPY in the same period. The company mainly provides natural gas and related energy products in District of Columbia, Maryland and Virginia. It's a mid-cap company which has a market cap of $2.21 billion. It currently trades with a forward PE of 16.6 and an expected EPS growth rate of 4%. The stock also offers a dividend yield of 3.6%. The company will hold its first quarter 2011 earnings conference call on February 6.
Another large-cap gas utility dividend stock is TransCanada Corp. (TRP). It has a dividend yield of 3.99% and returned 19% during the past year, outperforming the market by more than 17 percentage points. TransCanada mainly operates natural gas pipelines, oil pipelines and energy infrastructure in North America. It has a market cap of $29 billion and a forward PE ratio of 17. Its EPS is expected to grow at 7.2% annually for the next five years. The company will hold its earnings conference call on February 14, and release its Q4 2011 results at that time.
Other high dividend gas utility stocks include Sempra Energy (SRE), Integrys Energy Group, Inc. (TEG), AGL Resources Inc. (GAS), Inergy, L.P. (NRGY), Atmos Energy Corp (ATO), AmeriGas Partners LP (APU), and Piedmont Natural Gas Co. Inc. (PNY). We think dividend stocks can provide better returns to investors than fixed income securities. Marc Faber recently predicted that there is a bubble in long-term Treasuries. We urge investors to focus on the high dividend gas utility stocks and do some in-depth research on these stocks for their own portfolios.