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10 Best Dow Dividend Stocks for 2011

4. Microsoft (MSFT - Get Report) sells software, including the Windows operating system and Office product suite.

12-Month Sales Growth: 17%
12-Month Net Income Growth: 50%
Quarterly Operating Profit Margin: 44%
Cash Flow Multiple: 8.9 (53% peer discount)
Analysts' Median Target: $32.99
3-Year Dividend Growth: 10%
Dividend Yield: 2.3%
Payout Ratio: 24%

2011 Catalyst: Microsoft is one of the most compelling value stocks in the market. It has the strongest brand name in software, lofty margins, with a gross spread of 85%, and an obscene coffer for acquisitions. The Redmond, Wash.-based company held $44 billion of cash and equivalents at its fiscal first-quarter's end and less than $11 billion of debt, for a net liquidity position of $34 billion, plenty for acquisitions.

Its quarterly return on equity rose to 44%, more than doubling the industry average. Return on assets hit 23%, indicating superlative efficiency. Despite such attractive metrics, Microsoft sells for just 10-times forward earnings, a 59% industry discount.

Bullish Scenario: Stifel Nicolaus projects a $40 share price, implying 46% upside.

Bearish Scenario: FBR Capital Markets expects Microsoft's stock to rise marginally to $28.

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CVX $105.11 -0.13%
JPM $66.50 0.03%
HPQ $34.88 5.50%
KO $41.16 -0.47%
MSFT $47.26 -0.67%


DOW 18,282.20 -3.54 -0.02%
S&P 500 2,130.82 +4.97 0.23%
NASDAQ 5,090.7940 +19.0510 0.38%

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