The current low interest rate environment is driving investors to seek income in the stock market and possibly take unnecessary risks. But there are pockets of conservative dividend payers still trading at attractive levels with potential for capital gains for many months to come. 

#-ad_banner-#It is no secret that utility stocks are in that group. While they are no longer the “widow-and-orphan” stocks they were a few decades ago, many still pay generous dividends. And many have diversified their businesses to offer the growth potential a simple electric utility cannot.

Otter Tail (NASDAQ: OTTR) is a Minnesota-based electric utility, named for the Otter Tail River from which it generated its first kilowatt, that has diversified into manufacturing, plastics and construction. 

The stock has a modest trailing price/earnings (P/E) ratio of 19, which is below the average P/E for the Dow Jones Utility Average of 24. And the company pays a generous quarterly dividend of $0.3025 for a current yield of 3.9%. 

Over the past few months, OTTR has traded in a similar fashion as its more traditional utility peers, but when we look at the big picture we see a stock itching to break out to the upside, if has not already done so. The question over whether the breakout has already occurred comes from how we draw specific lines on the chart. But even if we choose the more conservative method, we still have a stock showing plenty of moxie.

On the chart, we can see OTTR is near the top of a two-year trading range. What I especially like about this type of setup is that even though prices have been rising for several months, they are pausing at resistance. Therefore, a breakout now would be the result of a surge in demand rather than just momentum pushing shares higher than they possibly should go. 

Giving the more aggressive approach its due, the pause is taking place after the sloping upper border of the pattern was already broken to the upside. 

Looking at the relative performance versus the S&P 500, which is shown at the bottom of the chart, OTTR is breaking out relative to the broader market, which has been the case for most utility stocks. This tells us that investors are moving money into this sector after taking it from others.

Taking an even longer-term view to put it all into perspective, we can see the trading range taking place at the 50% retracement of the 2008 price debacle. A breakout from the current two-year range also confirms that the stock has recovered half of its 2008 losses and is poised to move up even more.

If we measure the height of the range and project that amount up from the breakout point, using the more conservative version of the upper border, we get a target in the $36.75 area. 

Whether you are in it for income or capital gains, you could get both here. 

Recommended Trade Setup:

— Buy OTTR at the market price
— Set stop-loss at $29
— Set initial price target at $36.75 for a potential 18% gain in four months, including dividends

Note: Beyond dividends, there is another way conservative income seekers can generate monthly payments. In fact, this cash collection strategy, which you can use with just about any stock, is even more lucrative than dividends. Part-time investors are using it right now to collect $700… $2,000… and more every month. Click here for all the details.

This article originally appeared on ProfitableTrading.com: My No. 1 Dividend Stock to Buy Based on the Charts​