2 Gas Utility Stocks to Add to Your Portfolio as 2025 Wraps Up

Demand for natural gas is rising in the United States and internationally due to its clean-burning nature. High volume of 24/7 clean energy demand from AI-driven data centers, reshoring of some industries, higher usage of electric vehicles and higher domestic demand during cold winters continue to boost demand for natural gas.
  
As more coal-fired electric generation units are taken out of the generation in the United States, natural gas-based power generation is filling that void. Per a U.S. Energy Information Administration (EIA) release, natural gas will be contributing 40% of U.S. electricity generation in 2025 and 2026 each. Rising LNG export volumes from the United States continue to add to the demand for natural gas.

Amid the rising demand for natural gas, adding capital-intensive gas distribution utilities like Atmos Energy Corporation ATO and Spire Inc. SR to your portfolio can be beneficial before the year ends.

The U.S. Federal Reserve has gradually lowered the benchmark rate by 175 basis points, bringing down rates from a high range of 5.25%-5.50% to a range of 3.50-3.75%. The Federal Reserve is expected to lower interest rates further in 2026. Capital-intensive domestic-focused utilities benefit from the Fed’s decision to reduce interest rates.

The natural gas distribution industry plays a vital role in delivering natural gas from intrastate and interstate transmission pipelines to consumers through small-diameter pipelines. The shale revolution also helped utilities to extract natural gas and cater to the rising demand. Currently, a natural gas pipeline network of 2.5 million miles is utilized to distribute gas to customers across the United States.

Why Gas Utilities are a Safe Option for Investment

Utilities are often viewed as safe investments because they provide essential services across industries. Their stable earnings and reliable cash flows support consistent dividend payments, making them attractive to income-focused investors. Utilities are frequently seen as a bond substitute in an investment portfolio, as a decline in interest rates makes bonds less appealing to investors.

The EIA expects U.S. natural gas prices to rise during the winter, revising its forecast to about $4.30 per million British thermal units (MMBtu) for the 2025-2026 winter season. EIA forecasts the natural gas price to come down to $4.00 in 2026 due to higher production volumes and weather normalization.

2 Gas Utilities for Your Portfolio Heading Into 2026

We have used the Zacks Stocks Screener to shortlist two gas distribution utilities from the Zacks Utility- Gas Distribution industry with a Zacks Rank #2 (Buy) and a beta of less than 1, which indicates lesser stock volatility compared with the broader market. Both these gas distribution stocks are expected to continue their strong performance next year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Both companies have outperformed the Zacks Utilities sector in the past six months.

Price Performance (Six Months)

Atmos Energy: This Dallas, TX-based company is engaged in the regulated natural gas distribution and storage business. Atmos Energy plans to invest $26 billion through fiscal 2030 to strengthen its transmission and distribution systems to provide consistent, high-quality services to its customers. Supportive regulatory frameworks enable the efficient translation of safety and reliability investments into improved financial performance. The planned investment should result in 6-8% annual earnings growth during the period. The long-term (three to five years) earnings growth rate is pegged at 7.98%.

The current dividend yield is 2.34%, better than the Zacks S&P 500 composite’s yield of 1.4%. ATO’s current beta of 0.75 ensures more stability and less volatile performance, which income-oriented investors always prefer. The Zacks Consensus Estimate for ATO’s fiscal 2026 and 2027 earnings has moved up 1.52% and 1.18%, respectively, over the past 60 days. 

Spire Inc.: This St. Louis, MO-based natural gas company continues to expand business organically via making systematic investments to expand infrastructure and advance through innovation. Spire has increased its 10-year capital investment plan to $11.2 billion, now extending through fiscal 2035. This investment program underpins the company’s long-term adjusted EPS growth target of 5-7%, based on the fiscal 2027 adjusted EPS midpoint of $5.75.

The current dividend yield is 3.93%. Long-term earnings growth is currently pegged at 10.54%. SR’s current beta is 0.66. The Zacks Consensus Estimate for SR’s fiscal 2026 and 2027 earnings has moved up 4.77% and 4.27%, respectively, over the past 60 days.

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This article originally published on Zacks Investment Research (zacks.com).

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