Data center power demand could boost companies with ties to transporting and storing natural gas, and that bodes well for a few stocks that also happen to pay attractive dividends, according to Bank of America. "In this environment, we favor gas-linked names, especially midstream ones," said analyst Jean Ann Salisbury in an Oct. 17 report.
The natural gas liquids midstream space is "relatively defensive," she added. "Near-term gas oversupply is obscuring the brightening medium-term picture; we expect positive catalysts in 2025 as data center development and LNG demand materialize," the analyst said, referring to liquified natural gas. She added that the Street is not fully appreciating the companies' potential to generate free cash flow.
Here are a few of the stocks that Salisbury's team highlighted with buy recommendations. Enterprise Products Partners LP made the cut. Bank of America's price target of $35 suggests 20% upside from Tuesday's close.
The bank said Enterprise Products can maintain its market share in Permian natural gas liquids growth and that it has added "much needed" [liquified petroleum gas]/ethane export capacity. "If capex slows at the end of this buildout (which it should), potential cash flow payout is enormous at $3.3+/share," Salisbury's team said, adding that the company has already paid down debt to the low end of its peers.
Enterprise Products is generally well liked across Wall Street, with 17 out of 19 analysts covering the name rating it a buy or.
