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The boom in the natural gas industry and its stocks has been incredible, and the fundamental strength of the story continues to attract investors, leading them to ask for the best ways on how to invest in natural gas.
There's little doubt that demand for natural gas will continue its rise. The International Energy Agency (IEA) reports that an estimated 138 billion cubic meters of liquefied natural gas (LNG) production is under construction right now – and that capacity is going to jump to more than 500 billion cubic meters over the next five years.
Natural gas prices are set to rise in turn, along with an increase in exportation opportunities for U.S. companies. The IEA predicts that nearly 80% of the natural gas export will end up in Asia, especially in Japan and China. China is expected to triple its demand for natural gas by 2020. This tandem of higher prices and increased exports will trickle down to company bottom lines, teeing up natural gas stocks to climb in 2014, and beyond.
One of the best ways to participate in this rally is through the LNG shipping stocks, which are not only profiting from export demand, but also from the rise in spot prices.
So investors hunting for how to invest in natural gas industry can consider these three LNG shipping stocks as a promising way to participate in the boom…
How to Invest in Natural Gas: LNG Shipping Stocks
Golar LNG Limited (Nasdaq: GLNG)
Golar is an old name in LNG shipping, in operation for more than 30 years. The company has a fleet of 13 vessels, and is looking to add 11 more vessels this year with the aim of significantly increasing its shipping volumes.
Golar's business isn't just restricted to shipping – the company is well-diversified throughout the LNG space.
For instance, Golar has a floating storage and regasification unit. The unit receives oil or gas, and then processes and stores it so that it can be transported through a pipeline or can be uploaded on a tanker. Golar also has 25% stake in the Douglas Channel project in British Columbia.
GLNG stock is well-poised for steady appreciation during an LNG boom, and investors can play it through the LNG shipping industry. The stock has given a 177% return since January 2011, and still looks attractive in terms of valuation. Shares in GLNG currently cost $41.71 per share, with a 52 week range of $30.51-$43.94.
Chevron Corp. (NYSE: CVX)
As the nation's second-largest oil company and the world's fourth-largest energy producer by market value, Chevron is one of the most prominent names in the energy industry. The company is into various segment of energy business including LNG transportation, processing and storage. To ensure future growth, CVX continues to invest heavily in exploration in countries such as Australia, Iraq, West Africa and South America.
Given its level of integration, the company has been and will continue to benefit from the LNG boom. In fact, Chevron is one of the world's largest LNG producers. With the strong demand and uptrend in LNG prices, Chevron stands to benefit significantly. Plus, given the uptrend in spot prices, the transportation business of Chevron will also contribute significantly towards the company's earnings.
Chevron stock saw a correction at the start of the year as the company missed revenue expectations by a big margin, but prices are now picking up again. CVX stock is up 3.73% over the last month to $119.02 per share. The icing on the cake is the dividend yield of the company, which is around 3.5%. Chevron has solid dividend track record, making it a good stock in the long-term.
DHT Holdings Inc. (NYSE: DHT)
DHT Holdings recently benefited from the uptick in spot prices, and positive longer-term natural gas pricing looks favorable for the company.
DHT is a pure crude tanker player with ten tankers currently operational; it has an order in for additional vessels that are set to arrive in 2016 and will significantly increase the company's shipping volumes.
Though the dividend yield of 1% is not very attractive for dividend hunters, given the fleet expansion plans, stock growth may make up for low dividend yield. DHT Holding doesn't technically qualify as a penny stock, but at around $8 per share, it's quite affordable for retail investors.