In this article, we are going to discuss the 13 best natural gas and oil dividend stocks to buy.
The United States of America is the Largest Oil Producing Country in the World. The country’s oil production has surged by almost 50% over the last decade, reaching just over 13.45 million barrels per day (bpd) in October 2024. However, despite the historically high levels of output, total US production growth has slowed in recent years, climbing only about 280,000 bpd last year. The US Energy Information Administration (EIA) has forecasted the country’s crude oil production to flatten in 2026, with operators reducing the number of active drilling rigs as crude oil prices fall, allowing natural declines in existing wells to overtake production from new wells next year. The EIA expects US crude production to reach an all-time high in 2025, averaging 13.5 million bpd, increasing slightly to 13.6 million bpd in 2026.
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The US natural gas output also stands near an all-time high as a period of strong demand and improved prices sparked a resurgence in production. The EIA expects these prices to further increase in 2025 and 2026 as demand for natural gas is projected to grow mainly due to a jump in LNG exports. The country’s natural gas sector is also set to benefit greatly from the ongoing AI boom, as several dozen new gas-fired power plants are expected to be built in the US in the next few years. According to energy data provider Enverus, a total of 80 new gas power plants could be constructed in America by 2030, adding about 46 GW of new capacity – 20% higher than the gas capacity additions in the last five years.
President Donald Trump has made repeated calls to the American oil and gas sector to increase production as he holds the fossil fuel industry as a centerpiece of his broader economic mission. However, the country’s O&G majors are reluctant as increasing output even further could create a glut and drive prices down, which they want to avoid.
Instead, producers are focused on keeping their capital spending under control and attaining higher operational efficiencies, while prioritizing returning cash to shareholders after a pricing rout in the last decade hurt profits and share prices. Several oil bigwigs have even had to resort to borrowing money to make sure they keep their shareholders happy. According to a report by Janus Henderson, companies in the energy sector distributed over $49 billion in dividends during the third quarter of 2024, up from $32.2 billion three years ago. However, maintaining such high payouts to shareholders will get even tougher for the oil majors in the future, as the EIA expects Brent crude oil prices to fall 8% to average $74 a barrel in 2025, then fall further to $66 a barrel in 2026.
The energy sector has witnessed considerable fluctuations over the last few months, rising by over 6% in November before falling almost 10% in December. The broader energy sector ended 2024 with a return of just 5.72%, significantly lagging behind gains of 25% by the wider market.
With that said, here are the Best Natural Gas and Oil Dividend Stocks According to Hedge Funds.
A row of massive oil rigs in a desert landscape, against a setting sun.
Methodology:
To collect data for this article, we observed various companies working in the oil and gas sector and then picked out companies with the highest dividend yields as of February 6, 2025, and ranked them by their number of hedge fund investors according to the Insider Monkey database as of Q3 2024. Following are the Best Natural Gas and Oil Dividend Stocks to Buy Now.
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13. BP p.l.c. (NYSE:BP)
Number of Hedge Fund Holders: 36
Dividend Yield: 5.53%
BP p.l.c. (NYSE:BP) is a British multinational company recognized worldwide for quality gasoline, transport fuels, chemicals, and alternative sources of energy such as wind and biofuels. The company boasts a workforce of around 90,000 with operations in 70 countries worldwide.
The recent slump in crude prices and lower refining margins have also taken a toll on BP p.l.c. (NYSE:BP). The company reported its weakest quarterly earnings in nearly four years in Q3 of 2024, with $2.3 billion in underlying profit, down 30% YoY. Despite the tough situation, BP remains focused on returning value to its shareholders and announced another $1.75 billion share buyback and a dividend per ordinary share of $0.08 at the end of the third quarter of 2024.
However, in recent positive news for the company, it was announced this week that BP p.l.c. (NYSE:BP) has discovered substantial oil and natural gas reserves in Egypt’s King Mariout offshore block in the northern Mediterranean. Moreover, it was also recently announced that BP is expected to spend up to $25 billion in a 25-year profit-sharing agreement to redevelop four Kirkuk oil and gas fields in Iraq. Under the terms of the contract, the oil major would boost crude production capacity from the four oilfields in Kirkuk by 150,000 barrels per day to raise total capacity to at least 450,000 bpd in 2-3 years.
12. Kinder Morgan, Inc. (NYSE:KMI)
Number of Hedge Fund Holders: 42
Dividend Yield: 4.29%
Kinder Morgan, Inc. (NYSE:KMI) is one of the largest energy infrastructure companies in North America. The company has an interest in or operates approximately 79,000 miles of pipelines and 139 terminals. These pipelines transport natural gas, gasoline, crude oil, carbon dioxide, and more, while the terminals store and handle renewable fuels, petroleum products, chemicals, vegetable oils, and other products.
In Q4 of 2024, Kinder Morgan, Inc. (NYSE:KMI) reported revenue of $3.99 billion, down from $4.04 billion last year, as it struggled with lower crude and condensate volumes transported through its pipelines, which were down about 5%. The company announced a regular cash dividend of $0.2875 per share for Q4, marking an increase of 2% YoY. As more of its new assets get integrated, the company remains confident that it will increase the dividend for the eighth consecutive year also in 2025.
Just days after President Donald Trump lifted the freeze on new LNG export permits, Kinder Morgan, Inc. (NYSE:KMI) announced that it is proceeding with its approximately $1.7 billion Trident Intrastate Pipeline project, a 216-mile pipeline that will provide about 1.5 billion cubic feet per day of capacity from Katy, Texas, to the LNG and industrial corridor near Port Arthur. The project is to be in service in the first quarter of 2027.
With gains of over 62% in the last year, Kinder Morgan, Inc. (NYSE:KMI) was also included in our list of the 12 Hot Oil Stocks to Buy According to Hedge Funds.
11. EOG Resources, Inc. (NYSE:EOG)
Number of Hedge Fund Holders: 46
Dividend Yield: 3.08%
Next on our list of the Best Oil and Gas Dividend Stocks is EOG Resources, Inc. (NYSE:EOG), a company that explores, develops, produces, and markets natural gas and crude oil.
EOG Resources, Inc. (NYSE:EOG) reported a strong Q3 2024, beating Wall Street estimates as higher production helped offset lower prices. The company reported $1.6 billion of adjusted net income and generated $1.5 billion of free cash flow on $1.5 billion in capital expenditures. Third quarter capital expenditures were also in line with the forecast, and the oil and gas firm still expected its full 2024 capital expenditures to be about $6.2 billion. EOG also repurchased $758 million of shares and paid a dividend of $0.91 per share during the quarter, maintaining its record of never reducing or suspending its regular dividends since it started paying them 27 years ago.
Since the end of 2020, EOG Resources, Inc. (NYSE:EOG) has generated more than $22 billion of free cash flow and over $25 billion in adjusted net income. The oil and gas producer also increased its regular dividend rate by 160% during the period and has paid or committed to pay more than $13 billion directly to shareholders through dividends and $3.2 billion indirectly through share repurchases, all while also reducing debt by 35%.
Shares of EOG Resources, Inc. (NYSE:EOG) were held by 46 hedge funds in the IM database at the end of Q3 2024, with a total stake value of $836.45 million, up 45.2% from the previous quarter.
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