The natural gas (NGZ24) market is going through a major transition in 2024, offering attractive opportunities for investors looking for dividends. Global demand for natural gas is expected to increase by 2.5% this year, showing a strong recovery from the market difficulties seen before. This growth is happening at a time when market dynamics are shifting significantly - especially in the U.S., where natural gas is expected to serve as a key “bridge fuel” to supply data centers while nuclear energy and other alternative supplies scale up.

Bank of America recently resumed coverage of natural gas companies, and noted that many stocks in the group appear to be undervalued. In particular, EQT Corporation (EQT) and Exelon Corporation (EXC) were called out for their appealing risk profiles, "discounting just $3.20 against a forward curve we see closer to $3.75." 

Projecting that the buildout of liquefied natural gas (LNG) could boost domestic demand by 16%, and “tether U.S. fundamentals to the global market,” BofA sees a buying opportunity for these energy stocks. As we head into a catalyst-laden month of November for markets, here's a closer look at these top energy dividend picks.

#1. EQT Corporation (EQT)

With a market capitalization of $17.03 billion, EQT Corporation (EQT) is the largest natural gas producer in the United States, mainly operating in the Appalachian Basin, which includes Pennsylvania, West Virginia, and Ohio. The company focuses on responsibly developing natural gas resources using advanced drilling and production methods.

EQT stock is down about 4.8% on the year so far, but has gained 232% over the past five years. 

The company offers a forward dividend yield of 1.63%, with a payout ratio of 47%, and has increased its dividend for two years in a row following a pandemic-era pause. The quarterly dividend is $0.157 per share.

In its recent earnings report, EQT showed strong performance, with sales volume reaching 581 billion cubic feet equivalent (Bcfe), surpassing expectations. The company’s capital expenditures were $573 million, which was below its guidance range, and its operating costs were also better than anticipated at $1.07 per thousand cubic feet equivalent (Mcfe). For the fourth quarter of 2024, EQT projects total sales volume between 555 and 605 Bcfe, with an average price differential of ($0.60) to ($0.50) per thousand cubic feet (Mcf).

Two major developments highlight EQT's potential for growth and value creation. First, completing the Equitrans Midstream acquisition has established America’s only large-scale, vertically integrated natural gas business, with a breakeven price for free cash flow projected at around $2.00 per million British thermal units (MMBtu). 

Second, EQT is advancing plans to produce clean hydrogen and low-carbon aviation fuel from its Appalachian natural gas, which could create new revenue streams and strengthen its commitment to sustainability.

Analysts have a positive outlook on EQT, giving it a consensus rating of "moderate buy." Out of 20 analysts, 11 recommend it as a “strong buy,” one as a “moderate buy,” and eight as a “hold.” The average price target is $42.19, suggesting about 15.5% expected upside from the current price. 

#2. Exelon Corporation (EXC)

Exelon Corporation (EXC) is a major utility services holding company that focuses on energy generation, delivery, and marketing. The company emphasizes clean energy solutions and operates through several subsidiaries, including ComEd, which provides electricity to about 4.1 million customers in northern Illinois.

In 2024, Exelon’s stock has shown resilience, gaining 9.5% year-to-date. Longer-term, EXC is up 24.3% in the past five years.

Exelon offers an attractive forward dividend yield of 3.83%, based on its quarterly payout of $0.38 per share. The company has paid dividends for 22 consecutive years, including two consecutive years of growth.

In its Q3 2024 earnings report, Exelon reported GAAP net income of $0.70 per share and adjusted operating earnings of $0.71 per share. The company reaffirmed its full-year 2024 adjusted operating earnings guidance range of $2.40 to $2.50 per share, and maintained a target for compounded annual growth of 5-7% through 2027.

Recent developments make Exelon an appealing option for investors looking to diversify their energy portfolios this November. ComEd, an Exelon company, just received $50 million in federal funding from the Department of Energy (DOE) to improve grid resilience and support clean energy investments in Illinois, an initiative that will total $116 million over five years.

Analysts have a cautiously optimistic view on Exelon, rating it as a "moderate buy" overall. Out of 18 analysts, five recommend it as a "strong buy," 12 suggest a "hold," and one rates it as a "strong sell." The average target price is $43.20, indicating about 9.9% upside potential from Thursday's close. 

This consensus suggests that while Exelon may not be considered a high-growth stock, its stability and reliable dividends present an overlooked opportunity for conservative investors seeking steady returns this November.

Conclusion

Both EQT Corporation and Exelon Corporation offer compelling opportunities for investors looking to tap into the energy sector this November. With EQT's strong recovery momentum and strategic moves in natural gas, alongside Exelon's steady growth and commitment to clean energy, these two dividend-paying stocks are well-positioned for long-term gains. If you're looking for solid income potential with room for growth, these overlooked energy stocks might just be worth adding to your portfolio.