The Dow closed up to 126 points 12,581 Tuesday, but if you're a little hesitant to invest some new money in stocks, that's understandable.
The uneven, tepid U.S. economic expansion, the nation's roughly 11 million job shortage, and renewed concern that Europe's government debt situation could slow the U.S. economy to a crawl -- or even tip it back into a recession -- have formed an infamous dark cloud on the investment horizon.
What's one way to cautiously commit new money to equities? Consider stocks that also offer modest safety via paying a decent dividend, and here are three.
BP Prudhoe Bay Royalty Trust: Dividend Superstar
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 (bpd) of average daily production per quarter from BP's share of the Prudhoe Bay oil field.
BPT's current annual dividend is about $10 per share, good for an impressive 9 percent yield at the current trust price of $110.
Investors should not expect an outsized capital gain with BPT: a 5-7% annual stock appreciation is the realistic forecast, but shares could just as easily retreat 5% during that period. BPT is a decidedly dividend-based play, hence don't consider BPT if your emphasis is capital gain.
BPT's 1-year stock range is $96.18 to $129.49, and the 5-year stock range is $50 to $131.49.
TransCanada Corp.: Natural Gas Growth And A Dividend, To Boot
Natural gas/energy storage and transmission company TransCanada Corp.'s (TRP) is a dividend play with the promise of above-average growth.
In addition to its a natural gas transmission and storage assets, TransCanada also owns oil assets and electric power generation assets -- roughly 10,800 megawatts worth, in Canada.
TRP's annual dividend is solid $1.70 -- good for a 4.2% yield at the current $40.40 share price.
Further, Phase 1 of TRP's $12 billion Keystone Pipeline System, with the capacity to transport 435,000 barrels per day (bpd) of crude oil, opened in June 2010. Phase 2 boosted production capacity to 591,000 bpd in February 2011. Further, although the U.S. State Department rejected TRP's application to build Keystone XL pipeline, which would flow Alberta oil sands and Bakken shale oil to Gulf of Mexico refineries, TRP said it will folllow-through with a new application.
Add about 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. Reuters expects TRP to earn $2.32 and $2.55 per share in 2012 and 2013, respectively.
Ferrellgas Partners LP: Promising Propane Play
Low-profile play Ferrellgas Partners LP (FGP) is the second largest seller of propane in the United States -- a fuel primarily used in areas where natural gas in not available or can not be easily transported to.
Ferrellgas will likely post a decent 6% revenue gain in 2012, after booking a 20% rise in 2011. Sales gains this year will likely stem primarily from market share gains and minor acquisitions.
A company-wide cost cutting program, and FGP's effort to expand its more-profitable cylinder exchange program, add to the positive story.
Further, Ferrellgas' dividend is a solid $2 per year -- good for an 11.5% yield at the current roughly $17.00 share price. Reuters expects FGP to lose 24 cents in 2012 and earn 28 cents 2013.
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).
Disclosure: Lazzaro has no positions in U.S. or foreign stocks.