What happened

Shares of Williams Companies (NYSE:WMB) declined by 12.2% in July, according to data provided by S&P Global Market Intelligence. Weaker natural gas prices weighed on the company last month.

So what

The price of natural gas tumbled to a three-year low in late July. That slump came even though gas demand from power plants surged as they generated record amounts of electricity to power air conditioners amid the summer heat. Those weaker gas prices led analysts to believe that drillers will slow their growth rate in places like the Marcellus Shale.

Those lower prices won't directly impact Williams Companies since it has minimal direct exposure to commodity prices. However, it could result in less volume flowing through its gathering systems in that region if drillers slow their pace. That potential slowdown put pressure on its stock last month.

Pipelines over a sunset

Image source: Getty Images.

Williams partly offset those headwinds by announcing strong second-quarter results at the end of the month. The pipeline giant's earnings jumped 12%, while cash flow soared more than 36%. The main driver was the recent completion of expansion projects on its Transco Pipeline. The company also delivered good results in its Northeast gathering and processing segment as volumes surged in both the Marcellus and Utica shale plays.

Williams' excellent second quarter gave the company the confidence to reaffirm its full-year forecast. It continues to believe that earnings will rise by 12% while cash flow will increase by 8%. That would provide enough money to cover its 6.1%-yielding dividend by a comfortable 1.7 times. The company also continues to expect that it will be able to expand its earnings at a 5% to 7% annual pace after next year, which should support similar growth in its dividend.

Now what

William's sell-off last month doesn't make much sense. While low gas prices might hurt its Northeast gathering and processing business, the company has many other growth drivers to help offset that potential weak spot. Because of that, last month's sell-off looks like a potentially excellent buying opportunity for this top-notch dividend growth stock.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.