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Cheap natural gas has made this a year for price pullbacks among natural gas stocks and related investments.
Look at United States Natural Gas Fund (NYSE: UNG), the exchange-traded fund following the price of the fuel. In July 2011 it was selling for over $45 a share.
UNG hit a 52-week low of $14.25 on April 19.
Now it's climbed back up to near $20, but still well off its 52-week high of $50.52.
But don't think this price lull is permanent. There are many reasons the fuel will be more in demand – and eventually, more pricey.
"Natural gas doesn't give cancer…it'sa very useful product, very cheap per Btu — much less than oil, and is less pollutive than oil or coal," said legendary investor Wilbur Ross, who is long-term bullish on natural gas, in a recent interview. "There may be a little more downward blip but I think the worst part has got to be over."
Still, no one wants to "catch a falling knife."
Luckily, there's a way to hedge against any more declines in the price of natural gas and maximize the time value of money while buying at what proves to be a rewarding price.
That's with high-yield natural gas stocks. And there are a number of these companies that are very appealing.
Profit from High-Yield Natural Gas Stocks
The months ahead are an ideal time to buy dividend-paying stocks in the natural gas sector.
As detailed in a previous Money Morning article, "Why Investors Sell in May and Go Away," the prime time to sell is upon us. This usually pushes stocks down – meaning investors will have very attractive prices at which to buy.
For those investors looking for yield, here are some options.
BHP Billiton (NYSE ADR: BHP): BHP Billiton, an Australiannatural resource and mining conglomerate, is a very attractive natural gas play.Declining economic growth in Asia and the fall in the price of commodities has BHP Billiton off by 31% for the last year of trading. Now around $63, BHP Billiton is about one-third below its 52-week high.
But while investors wait for a rebound in natural gas prices and BHP stock, they'll enjoy a 3.5% dividend yield.
At present, the average dividend for a stock on the Standard & Poor's 500 Index is around 2%. Not only is the dividend yield for BHP Billiton almost twice the S&P average, its payout ratio of 25.6% is much lower. That is important as there is plenty of cash flow for BHP Billiton to increase its dividend or initiate stock buyback programs to further reward its shareholders.
PAA Natural Gas Storage (NYSE: PNG): For those seeking robust income streams from companies operating in other segments of the natural gas sector, PNG is a great option in the storage business.
PAA Natural Gas Storage, headquartered in Houston, TX,has a dividend yield of 7.8%. PNG owns and operates natural gas storage facilities in Louisiana and Michigan. On a quarterly basis, both sales growth (450.76%) and earnings-per-share growth (36.41%) are soaring.
"PNG is an outright distributor of gas to a wide spectrum of the market – from local gas companies, electric generating plants, and industrial users to main pipeline systems and liquefied gas producers," explained Money Morning Global Energy Strategist Dr. Kent Moors. "That combination of storage with distribution closer to the end user results in a higher dividend."
Niska Gas Storage Partners (NYSE: NKA): Niska, also based in Houston, TX,owns and operates natural gas storage assets. Customers paying for the usage of its storage facilities include power companies, financial institutions and pipelines, among others.Niska Gas Storage Partners pays a double-digit dividend of 11.4%.
When Niska reported earnings May 22, GAAP-reported sales were $57.3 million, 32% higher than the prior year's quarter. Earnings per share of 49 cents beat The Street estimates of 27 cents.
NKA has climbed 36% this year.
In fact, Kent recently raised his oil price target – significantly.
But if you missed it, a major event is now just six weeks away that will have profound effects on the market. And oil at this target level is set to have significant effects worldwide – many of which the world is not prepared for. Yet the most significant effect of all – for you, anyway – will be the extraordinary amount of money this situation is likely to create.
Related Articles and News:
- Money Morning:
How Natural Gas Companies Could Save You 25% on Fuel
- Money Morning:
How to Profit from High Crude Oil Prices