3 Natural Gas Stocks Set to Thrive in This Winter's Freeze

Key Points

• Kinder Morgan is a midstream leader with a high dividend that only touches on part of the opportunity.
• The pullback in ONEOK stock presents investors with an attractive opportunity.
• NGL Energy Partners is a more speculative investment but also offers the opportunity for a massive reward.  

Active traders and investors understand the importance of taking what the market gives you. When it comes to energy stocks, the market provides some simple realities. In summer, it gets hot, and in winter, it gets cold. And for much of the United States, this winter has been particularly cold. 

That means it’s time to invest in natural gas. That hasn’t been the case for much of the last five years. With the exception of 2022, when natural gas prices spiked after the war between Russia and Ukraine broke out, natural gas stocks have been a tough trade.

However, natural gas futures on January 9, 2025, show a 12% year-over-year increase. And as Thomas Hughes noted, the U.S. Energy Information Administration (EIA) expects LNG prices to average $3.00 in 2025. To support that forecast, on January 8, 2025, the EIA reported that natural gas inventories were down by 40 billion cubic feet in the first week of the year.

That still means inventories are 6.5% above their five-year average. But that’s likely to change as some European nations will need to increase their stockpiles, and many companies look to turn to natural gas in an effort to reduce transmissions. Here are three natural gas stocks to consider.

Kinder Morgan: A High-Yield Dividend Is Only the Beginning

Kinder Morgan Inc. NYSE: KMI is a midstream company that owns and operates a vast network that spans 79,000 miles throughout North America. Specific to natural gas, Kinder Morgan is responsible for transporting approximately 40% of the natural gas produced in the United States. That means the company’s earnings growth depends more on the volume it transports rather than the underlying price of natural gas.

Analysts are projecting high single-digit earnings growth in 2025. However, that may not be fully pricing in the voracious demand for natural gas that is emerging, particularly with the number of data centers being built to keep up with the demand for artificial intelligence (AI) applications.

Like many companies in this sector, Kinder Morgan is known for being a reliable dividend payer. In fact, KMI stock has a high yield of 4.07% as of January 9, 2025. The company’s chief executive officer (CEO) Kim Dang is expecting the dividend to increase by 1.7% this year to $1.17 per share. That would be eight consecutive years of increases for the company.

ONEOK: Use the Recent Pullback as a Buying Opportunity

ONEOK Inc. NYSE: OKE is a diversified energy infrastructure company with a network of over 50,000 miles of pipelines. The company specializes in natural gas and natural gas liquids (NGL).

Over the past three years, ONEOK has grown its earnings per share by 14% year-over-year (YOY). Over that same period, OKE stock rose by an average of 18%. So, it’s important to note that analysts are forecasting the company’s EPS to grow by 17% in the next year. Is it reasonable to expect that the stock will continue to follow suit?

Recent price action suggests buyers may have an opportunity. At one point in 2024, OKE stock had posted a 76% gain from its 52-week low. That had many analysts issuing downgrades or lowering their price targets for the stock. However, the move lower in the stock has found support around $97. Now, the consensus price target of 12 analysts is around $115. That's an 11% stock price gain to go along with a dividend that yields 3.86%.

Analysts Are Forecasting Strong Upcoming Earnings for NGL Energy Partners

NGL Energy Partners LP NYSE: NGL operates as a vertically integrated master limited partnership (MLP) with a network of midstream pipelines and storage facilities. In addition to natural gas, the company also manages water pipelines as well as crude oil.

The company’s second-quarter earnings report for its fiscal year 2025 came in lighter on the top and bottom lines. Despite that, as of January 9, 2025, NGL stock is up approximately 28% since the earnings report.

The reason for that comes from analysts who are projecting positive earnings of 11 cents for the full year. After delivering negative 35 cents per share in the first two quarters, that will require significant earnings growth.

The risk is that the company may not pull that off. But if it does, NGL stock can be a profitable trade for swing traders.