10 Dow Dividend Stocks for Weary Investors

BOSTON (TheStreet) -- Investors are getting earnings-season jitters. Dow stocks still offer bargains and big quarterly dividends, even after last month's rally. To play it safe as companies release earnings in the next four weeks, here are the 10 cheapest Dow dividend stocks. They are ordered by forward earnings multiple, from cheap to cheapest.

10. Intel ( INTC) is the world's biggest chipmaker. Intel will report third-quarter results Oct. 12. It swung to a second-quarter profit of $2.9 billion, or 51 cents a share, from a loss of $398 million, or 7 cents, a year earlier. Revenue grew 34% to $11 billion. The operating margin rose from 19% to 37%. Intel's stock trades at a forward earnings multiple of 10, a book value multiple of 2.4 and a cash flow multiple of 7.1 -- 23%, 56% and 52% discounts to semiconductor peer averages. Of analysts covering Intel, 31 rate it "buy", 19 rate it "hold" and two rank it "sell." Intel pays a quarterly dividend of 16 cents, equal to an annual yield of 3.4% with a payout ratio of 38%.

Bullish Scenario: Stifel Financial ( SF) offers a price target of $32, suggesting a 70% return.

9. Exxon Mobil ( XOM) is the biggest oil company not owned by a government. Second-quarter profit surged 91% to $7.6 billion, or $1.60 a share, as revenue gained 25%. The operating margin widened from 8.5% to 12%. Exxon's stock sells for a trailing earnings multiple of 12, a forward earnings multiple of 9.9, a book value multiple of 2.3 and a sales multiple of 1 -- 23%, 30%, 44% and 45% discounts to oil and gas peer averages. Of researchers following Exxon, nine rate its stock "buy", 11 rate it "hold" and one ranks it "sell." Exxon pays a quarterly dividend of 44 cents, translating to a 2.8% yield and 34% payout ratio. Its stock has fallen 9% in 2010, lagging the Dow.

Bullish Scenario: Macquarie ( MQBKY) forecasts that Exxon's stock will advance 42% to $88.

8. Merck & Co. ( MRK) sells pharmaceuticals for humans and animals. Merck's second-quarter net income plummeted 52% to $752 million and earnings per share tumbled 68% to 24 cents, hurt by a larger float. Revenue soared 92% to $11 billion. The operating margin climbed from 28% to 31%. Merck's stock trades at a trailing earnings multiple of 8.5, a forward earnings multiple of 9.6 and a book value multiple of 2 -- 45%, 28% and 59% discounts to pharmaceutical peer averages. It's expensive based on cash flow. Of analysts covering Merck, 18 advise purchasing its shares and eight recommend holding them. None advocate selling. Merck pays a 4.2% dividend yield with a 35% payout ratio.

Bullish Scenario: Deutsche Bank ( DB) values Merck's stock at $48, implying 32% of upside.

7. Microsoft ( MSFT) is the world's largest software company. Second-quarter profit increased 48% to $4.5 billion, or 51 cents a share, as revenue climbed 22%. The operating margin extended from 31% to 37%. Microsoft's stock sells for a trailing earnings multiple of 12, a forward earnings multiple of 9.3, a sales multiple of 3.4 and a cash flow multiple of 8.8 -- 64%, 66%, 81% and 60% discounts to software industry averages. Of researchers evaluating Microsoft, 33 rate its stock "buy" and eight rate it "hold." None rank the shares "sell." Microsoft pays a quarterly dividend of 16 cents, equaling an annual yield of 2.7% with a payout ratio of 30%.

Bullish Scenario: Credit Suisse ( CS) predicts that Microsoft's stock will appreciate 68% to $40.

6. Travelers ( TRV) is a property and casualty insurer. Its second-quarter net income dropped 9.5% to $670 million, but earnings per share rose 6.3% to $1.35, boosted by a smaller float. Revenue inched up to $6.2 billion. The operating margin declined from 17% to 16%. Travelers shares trade at a trailing earnings multiple of 7.9, a forward earnings multiple of 9, a book value multiple of 0.9 and a cash flow multiple of 7.2 -- 53%, 17%, 79% and 23% discounts to insurance industry averages. Of analysts covering the stock, 11 advise purchasing, 12 recommend holding and one says to sell it. Travelers pays a dividend yield of 2.8% with a payout ratio of 22%.

Bullish Scenario: FBR Capital Markets ( FBCM) values Travelers at $69, suggesting a 33% return.

5. Bank of America ( BAC) is a financial services company, holding about a quarter of all U.S. mortgages. Second-quarter net income declined 3.1% to $3.1 billion. Earnings per share fell 18% to 27 cents, hurt by a higher share count. Revenue decreased 13%. The operating margin rose from 21% to 27%. Bank of America's stock sells for a forward earnings multiple of 8.9, a book value multiple of 0.6, a sales multiple of 1 and a cash flow multiple of 1.2 -- 26%, 31%, 34% and 57% discounts to peer averages. Of analysts following Bank of America, 25 rate its stock "buy" and eight rate it "hold." None rank it "sell." It pays a 0.3% dividend yield. Bank of America suffered losses in last year's third and fourth quarter.

Bullish Scenario: Buckingham Group forecasts that the stock will nearly double to $26.

4. Chevron ( CVX) is an integrated energy company. Its second-quarter profit more than tripled to $5.4 billion, or $2.70 a share, as revenue increased 30% to $49 billion. The operating margin widened from 7.4% to 14%. Chevron's stock trades at a trailing earnings multiple of 9.7, a forward earnings multiple of 8.5, a book value multiple of 1.7, a sales multiple of 0.9 and a cash flow multiple of 5.7 -- 38%, 40%, 59%, 51% and 22% discounts to oil and gas industry averages. Of researchers covering Chevron, 18 advocate purchasing its shares and nine recommend holding. None rate Chevron "sell." The stock offers a 3.6% dividend yield with a 34% payout ratio.

Bullish Scenario: Barclays ( BCS) values Chevron's stock at $110, implying 36% of upside.

3. JPMorgan Chase ( JPM) is a diversified financial-services company. Second-quarter net income soared 76% to $4.8 billion, but earnings per share more than tripled to $1.09. Revenue declined 4.7% to $28 billion. The operating margin extended from 29% to 43%. JPMorgan's stock sells for a trailing earnings multiple of 12, a forward earnings multiple of 8.4 and a cash flow multiple of 2.3 -- 36%, 29% and 14% discounts to peer averages. It's expensive based on book value and sales. Of analysts following JPMorgan, 28 rate its stock "buy" and five rate it "hold." None rank it "sell." JPMorgan pays a five cent quarterly dividend, equaling a 0.5% yield and 6% payout ratio.

Bullish Scenario: Barclays ( BCS) expects JPMorgan's shares to advance 54% to $60.

2. Hewlett-Packard ( HPQ) sells technology products and consulting services. Fiscal third-quarter profit ascended 6.1% to $1.8 billion, or 75 cents a share, as revenue grew 11% to $30 billion. The operating margin inched up from 9.5% to 9.9%. HP's stock trades at a trailing earnings multiple of 11, a forward earnings multiple of 8, a book value multiple of 2.2, a sales multiple of 0.8 and a cash flow multiple of 7.7 -- 45%, 53%, 52%, 76% and 45% discounts to hardware industry averages. Of researchers evaluating Hewlett-Packard, 27 advise purchasing its shares, 10 recommend holding and one says to sell. HP offers a 0.8% dividend yield and 9% payout ratio.

Bullish Scenario: Citigroup ( C) predicts that Hewlett-Packard's stock will climb 61% to $65.

1. Pfizer ( PFE) is a biopharmaceutical company. Second-quarter net income stretched 9.5% to $2.5 billion, but earnings per share dropped 8.8% to 31 cents, hurt by a higher share count. Revenue surged 58%. The operating margin fell from 34% to 31%. Pfizer's stock sells for a forward earnings multiple of 7.5, a book value multiple of 1.6 and a sales multiple of 2.2 -- 44%, 68% and 23% discounts to pharmaceutical peer averages. Of analysts covering Pfizer, 18 advise purchasing its shares, seven recommend holding and two suggest selling them. Pfizer pays a quarterly dividend of 18 cents, converting to a 4.3% yield and 66% payout ratio.

Bullish Scenario: Hilliard Lyons values Pfizer's stock at $30, suggesting a 77% return.

-- Written by Jake Lynch in Boston.

>To see these stocks in action, visit the 10 Dow Dividend Stocks for Weary Investors portfolio on Stockpickr.

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