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Stocks Under $10 with 50-100% upside potential - 14 days FREE!

8 Cheapest Dow Dividend Stocks for 2011

Stocks in this article: JPM TRV MSFT HPQ CVX BAC PFE

1. Pfizer (PFE - Get Report) sells pharmaceuticals including Dimetapp, Dristan and Halcion.

Quarter: Pfizer's third-quarter net income plummeted 70% to $866 million and earnings per share dropped 74% to 11 cents. Revenue advanced 39% to $16 billion. The gross margin declined from 88% to 87% and the operating margin fell from 38% to 31%. Pfizer has $22 billion of cash and $44 billion of debt, translating to a quick ratio of 1.6 and a debt-to-equity ratio of 0.5. Pfizer's 12-month sales have increased 46%, though net profit has fallen 25%.

Valuation: Pfizer's stock trades at a forward earnings multiple of 7.3, a book value multiple of 1.5 and a sales multiple of 2, 38%, 68% and 36% discounts to pharmaceuticals industry averages. But, its cash flow multiple of 13 represents a premium of 18%. A PEG ratio, calculated by dividing the P/E ratio by analysts' long-term growth forecast, of 0.3 demonstrates a 70% discount to estimated fair value. Pfizer is a consensus buy-side value pick, but has fallen 8.5% in 2010.

Dividend: Pfizer pays a quarterly dividend of 18 cents, translating to a one-year yield of 4.3% and an elevated payout ratio of 94%. Pfizer halved its dividend to 16 cents in 2009 amid recession, but has since lifted it.

-- Written by Jake Lynch in Boston.

To see these stocks in action, visit the 8 Cheapest Dow Dividend Stocks Portfolio on Stockpickr.


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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.
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