Hugoton Royalty Trust, HGT, looks like it is ready to break out. Plus in addition to that, you get a nice dividend of over 8%. The dividend changes depending on the market fluctuations. This stock is a play on natural gas. It has been going up since a huge downturn last year.

Why be bullish?

This company was started by XTO Energy. They spun it off and own a bunch of shares in this company: “It holds a 80% net profits interests in certain natural gas producing working interest properties of XTO Energy Inc.” This trust is always producing profit and giving the money back to the shareholders. When the price of natural gas goes up, they can give more dividends. They also use the money to look for more opportunities in drilling and producing more natural gas.

Recently inventories of natural gas has been going down. This is in part to the prices of oil moving up and just natural gas being at very low prices because of the high supply of inventories that have been built up. The price will continue to increase as natural gas producers slow down. The recent statistics on home sales increasing also gave a more positive outlook that natural gas demand will increase. OPEC is also cutting back on oil production which will furthur the demand for natural gas as a substitute.

Technically HGT hit a triple top at $18.60. It’s at $19.50 currently and it did not drop with the stock market the past couple days! The volume looks good and it appears it’s time for it to move up to new territory. Before this recession, the last time it hit these highs were in 2003. It continued to rise to $40 as commodities increased during the decade. I think this stock has reached a bottom. For those seeking stocks that are defensive and want to make a play on inflation, I’d definitely suggest this stock.