Natural Gas Prices Forecast to Rise Through 2026: Two Utility Stocks Worth Considering

The Investment Case Strengthens as Natural Gas Demand Accelerates

The outlook for natural gas remains compelling as consumption patterns shift across multiple sectors. U.S. Energy Information Administration (EIA) projections indicate natural gas will account for 40% of domestic electricity generation throughout 2025 and 2026, driven by several converging factors: the expansion of AI-powered data centers requiring round-the-clock clean energy, industrial reshoring initiatives, growing electric vehicle adoption, and increased heating demand during colder seasons. Additionally, rising LNG export volumes continue to support demand fundamentals, while coal-fired power generation units being retired accelerate the transition to gas-based electricity production.

The natural gas distribution network—comprising 2.5 million miles of pipelines—plays a crucial infrastructure role in delivering fuel from interstate transmission systems to end users. With the shale revolution enabling domestic extraction to meet growing consumption, the sector’s long-term prospects appear favorable.

Why Now? Interest Rates and Infrastructure Investment Create an Opportunity

The Federal Reserve’s monetary policy shift presents a tailwind for infrastructure-heavy utility operators. Benchmark rates have declined 175 basis points from the 5.25%-5.50% range to 3.50%-3.75%, with additional cuts anticipated in 2026. This rate environment significantly benefits capital-intensive businesses that rely on consistent, predictable cash flows to service debt and fund expansion.

Natural gas utilities, characterized by regulated business models and essential service mandates, function similarly to bonds in a diversified portfolio—providing stable income streams regardless of broader market volatility. As traditional bonds lose appeal in lower-rate environments, defensive dividend-paying stocks gain investor attention. The EIA’s revised natural gas prices forecast shows winter pricing reaching approximately $4.30 per million BTU for the 2025-2026 season, with expectations to normalize closer to $4.00 in 2026 following production increases and typical weather patterns.

Two Distribution Leaders to Monitor

Using fundamental screening criteria—Zacks Rank #2 (Buy) designation, beta below 1.0 for lower volatility, and proven six-month outperformance relative to the broader Utilities sector—two companies stand out:

Atmos Energy Corporation (ATO) operates regulated natural gas distribution and storage infrastructure from its Dallas headquarters. The company has committed $26 billion in capital expenditures through fiscal 2030 to upgrade transmission networks and enhance service reliability. This investment program supports projected 6-8% annual earnings growth, with a three-to-five-year earnings growth rate of 7.98%. ATO’s 2.34% dividend yield exceeds the S&P 500 composite’s 1.4%, while its 0.75 beta demonstrates reduced volatility. Analyst consensus estimates for fiscal 2026 and 2027 earnings have improved by 1.52% and 1.18% respectively over the past 60 days.

Spire Inc. (SR), headquartered in St. Louis, continues infrastructure expansion through disciplined capital deployment and operational innovation. The company has increased its 10-year capital investment plan to $11.2 billion, now extending through 2035. This initiative targets adjusted EPS growth of 5-7%, with fiscal 2027 midpoint guidance at $5.75. SR’s 3.93% dividend yield and 10.54% long-term earnings growth rate make it attractive for income-focused investors. With a 0.66 beta indicating lower market sensitivity, SR’s earnings estimates have climbed 4.77% and 4.27% for fiscal 2026 and 2027 respectively over the past two months.

Looking Ahead

Both companies maintain defensive characteristics aligned with rising natural gas prices forecast trends and supportive regulatory frameworks. As the sector benefits from lower borrowing costs and sustained demand growth, distribution utilities offer a compelling combination of dividend income and earnings expansion potential heading into 2026.