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Five income plays that also represent a great value

The market appears to be relatively nonplussed by Wednesday’s report the economy contracted in the fourth quarter of 2012, but appearances can be deceiving. The apparent ambivalence may be the result of highly active institutional traders—those who move between stocks, bonds, and other assets, for example—for whom short-term fluctuations in interest rates are more significant than long-term changes in corporate earning potential. Such traders actually become skittish when economic signs are good, out of fear that a stronger economy will cause the Fed to raise interest rates. This has been the situation since at least the beginning of the year. As of today, however, the news of unexpected economic contraction has freed the market from the specter of higher interest rates, causing these traders to move back in.

Keep in mind that even when the market moves up, or stays flat on bad economic news, it is internally re-adjusting to the new situation, and so should you. If today's numbers are more than a blip and the economy is truly in trouble, it will mean lower earnings for most if not all companies. That is bad news if you are holding stocks in the expectation that the price will rise.

Fortunately, there is more than one way to make money in the market. In an uncertain economy, you may be better off owning stocks that pay high dividends. Dividends, obviously, are yours to keep whether the underlying stock rises or falls. That said, if you can identify companies that pay respectable dividends which can also boast limited downside risk or the potential for growth as well, they become even more attractive. Below are five companies that offer the potential for both growth and income. As utilities offer some degree of safety, four of these are in the energy sector. A fifth, from another sector entirely, offers more upside potential, albeit with greater risk.

Julian Close

Julian Close became a stockbroker in 1995. In his 20 years of market experience, he has seen all market conditions and written about every aspect of investing. Julian has also written extensively on corporate best practices and even written reports for the United Nations. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.