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10 Best Dow Dividend Stocks for 2011

Stocks in this article: HPQ MRK UTX MSFT CVX JPM KO

3. Chevron (CVX - Get Report) is the world's second-largest energy company. Its rival is Exxon (XOM).

12-Month Sales Growth: 20%
12-Month Net Income Growth: 36%
Quarterly Operating Profit Margin: 12%
Cash Flow Multiple: 5.8 (35% peer discount)
Analysts' Median Target: $95.86
3-Year Dividend Growth: 7.9%
Dividend Yield: 3.3%
Payout Ratio: 34%

2011 Catalyst: Like Microsoft, Chevron offers a compelling risk-reward proposition, given its size, management and competitive position.

Its trailing earnings multiple of 10, forward earnings multiple of 8.9, book value multiple of 1.7, sales multiple of 0.9 and cash flow multiple of 5.8 represent discounts of 46%, 58%, 59%, 70% and 35% to oil and gas industry averages. Its PEG ratio, a measure of value relative to predicted long-run growth, of 0.1 reflects a 90% discount to estimated long-term fair value.

With oil above $90 a barrel and predicted by some to pass $100 in 2011, Chevron's margins will elevate, amplifying its net income and earnings per share.

Bullish Scenario: Barclays values Chevron's stock at $107, suggesting 23% of upside.

Bearish Scenario: Deutsche Bank expects Chevron's shares to drop 8% to $80.

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