Dividend Stocks: Natural Gas Giant Williams Cos. Heating Up

Natural gas giant Williams Cos. (WMB), which is in IBD’s Dividend Leaders screen, is in focus, boasting strong growth prospects and a solid yield.

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Williams Cos. — headquartered out of Tulsa, Okla. — is one of the largest players in natural gas production and transportation. The company’s pipelines handle 30% of natural gas demand in the U.S. with terminals stretching coast to coast.

With a vast network of pipelines, soaring natural gas prices in Europe have been a major tailwind for Williams, which is able to process and send cheaper U.S. gas from production sites in the Midwest to ports in the Gulf of Mexico and East Coast. Demand prospects locally also seem strong in the long term as natural gas provides a cleaner alternative for electricity generation than coal and other fossil fuels.

Earnings Growth Expected To Continue Hot

Williams boasts strong three-year EPS and sales growth, with rates of 21% and 13%, respectively, according to IBD Digital. Sky-high gas prices have spurred further growth estimates. After reporting earnings of $1.36 per share last year, FactSet’s consensus EPS estimate is $1.65 for this year, increasing to $1.80 in 2023.

Dividend growth has been solid aside from a blip in 2016 after a proposed merger with Energy Transfer LP (ET) fell through.

Williams Cos. will pay its next quarterly dividend of 42.5 cents to shareholders of record on Dec. 9.

With strong growth and a solid dividend, Williams is an attractive stock for investment. This is especially the case due to supply constraints that are unlikely to be resolved quickly

Not only does Williams boast hot growth, but the company also pays out a solid dividend, currently yielding investors 5.1%. That’s well ahead of the 1.6% average yield of the S&P 500.

Nevertheless, volatility in the natural gas sector could not be higher heading into winter, signifying that investors should be cautious in entering and sizing positions.

Williams Cos. stock is forming a double bottom with a 35.89 buy point identified with MarketSmith pattern recognition.

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