The only thing better than a sector with a lot of growth potential - like energy stocks - is finding a financially sound group of stocks to buy within that sector that pays a healthy dividend to boot.
And a recent screen by investment research firm Value Line turned up five such energy stocks, all electric and gas utilities.
Technically, Value Line cast a wider net that included all stocks. The screen actually yielded 17 stocks, many of them well-known companies like McDonald's Corp., Lockheed Martin and General Mills.
But the beauty of an exercise like this is finding the less-obvious gems, which in this case turned out to be mostly energy stocks.
Value Line used several proprietary filters - financial strength, safety and timeliness -
to narrow the list.
Financial Strength is based on the company's balance sheet, as well such factors as cash flow and the level and direction of profits. Safety is based on price stability and financial strength,
and timeliness tracks a stock's relative price performance over the next six to 12 months.
The dividend stock criteria were particularly rigorous. Only stocks that had dividend growth at a compounded annual rate of at least 7% over the past five years and estimated growth rates of 7% for the next three to five years made the cut.
Furthermore, the minimum estimated yield for the next year had to be at least 3%.
"The set of stocks that made the final cut are not only judged to be safer than most, but also possess proven and prospective dividend growth rates that are likely toexceed the average rate of inflation," the Value Line report said, noting the list should "appeal to conservative investors in search of current income."
Let's take a look at the five energy stocks that landed on this choice list.Low-Risk Energy Stocks to Buy - with Plump Dividends
Interested in energy stocks? Check out this recent report: The Best Energy Stocks to Buy According to Industry Insiders
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