Three Dividend Stocks for Cautious Investors That Are Energy Growth Plays Too

If you're a little hesitant to invest more money in stocks right now, that's understandable. The uncertain state of the U.S. economy, the nation's 14.7 million job shortage, and renewed concerns about Europe's government debt are putting some big question marks next to the U.S. and European recoveries.

But for those looking to cautiously commit new money to equities, consider stocks that offer a bit more safety because they pay decent dividends. Here are three in the energy sector:

BP Prudhoe Bay Royalty Trust: A Dividend Star

If you're looking for a low-risk dividend play, BP Prudhoe Bay Royalty Trust (BPT), may be for you.

The trust distributes royalties on 16.4% of the first 90,000 barrels per day of average daily production per quarter from BP's share of the Prudhoe Bay oil field.

BPT's current annual dividend is $8.92 per share, good for an impressive 7.8% yield at the current trust price.

Investors should not expect an outsized capital gain with BPT: a 5% to 7% annual stock appreciation is the realistic forecast, but shares could just as easily retreat 5% during that period.

BPT's 1-year stock range is $79.56 to $131.49, and the 5-year stock range is $50 to $131.49.

TransCanada Corp.: Natural Gas Growth and a Dividend, to Boot

TransCanada (TRP) is a dividend play that offers the promise of above-average growth.

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In addition to its natural gas transmission and storage assets, TransCanada also owns oil assets and electric power generation assets, including 19 power plants. Further, Phase one of TRP's $12 billion Keystone Pipeline System, with the capacity to transport 435,000 barrels per day of crude oil, opened in June 2010. Phase 2 boosted production capacity to 591,000 bpd in February.

Add more than 380 billion cubic feet of natural gas storage capacity in an era in which natural gas will play a larger role in energy consumption, and one can see why there's considerable upside with TransCanada's shares.

TRP's annual dividend is a solid $1.70 -- good for a 4.1% yield at the current $41 share price. Reuters expects TRP to earn $2.29 and $2.46 per share in 2011 and 2012, respectively.

Ferrellgas Partners LP: Promising Propane Play

Low-profile Ferrellgas (FGP) is the second-largest seller of propane in the United States -- a fuel primarily used in areas where natural gas isn't readily available. Ferrellgas will likely post a nice 8% to 11% revenue gain in 2011, after booking a 1% rise in 2010. Sales gains will likely be supported by slowly increasing prices for propane.

A company-wide cost-cutting program, and FGP's effort to expand its profitable cylinder-exchange program add to the positive story.

Ferrellgas's dividend is a solid $2 per year -- good for a 7.6% yield at the current roughly $26 share price. Reuters expects TRP to earn 42 cents and 94 cents in 2011 and 2012, respectively.

Warnings and Reminders

Dividends decrease, but do not eliminate, risk. Keep in mind that all of the above stocks contain moderate risk and are not suitable for low-risk investors.

Safest Pick: BP Prudhoe Bay Royalty Trust (BPT).

Best Pick: (higher risk) TransCanada Corp. (TRP).

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.