BOSTON (TheStreet) -- As investors pour tens of billions of dollars into equities, historically cheap Dow stocks are among the most attractive, offering fat dividends and emerging-markets exposure. Although many people use trailing or forward price-to-earnings ratios as value gauges, cash flow is often more reliable. Here are the 10 cheapest Dow dividend stocks, based on cash flow per share. Below, they are ordered from cheap to cheapest.
9. Wal-Mart ( WMT) is not only the world's largest retailer, but the world's biggest company, based on sales. It is scheduled to release fiscal fourth-quarter results Feb. 22. Fiscal third-quarter net income increased 9.3% to $3.4 billion, but earnings per share climbed 16% to 95 cents, boosted by a lower share count. The operating margin remained steady at 5.5%. Wal-Mart's stock trades at a forward earnings multiple of 13, a 21% peer discount. Its trailing earnings multiple of 14 reflects a 12% discount to the five-year average. Wal-Mart receives "buy" ratings from 68% of analysts. HSBC, second most-accurate Wal-Mart forecaster of 2010, expects a rise of 23% to $68 in 2011.
7. Alcoa ( AA) sells aluminum and alumina worldwide. It swung to a fourth-quarter profit of $258 million, or 24 cents a share, from a loss of $277 million, or 27 cents, a year earlier. Revenue grew 4% to $5.7 billion. The operating margin widened from 1.2% to 7.3%. Alcoa's stock sells for a forward earnings multiple of 11, a book value multiple of 1.1 and a sales multiple of 0.8, 75%, 68% and 96% discounts to metals and mining industry averages. Yet, analysts offer poor reviews of Alcoa. It receives "buy" ratings from 53% of Wall Street researchers, ranking as the fourth worst-rated Dow stock. However, unloved equities often outperform.
5. Chevron ( CVX) is the world's second-largest energy company after Dow component Exxon Mobil ( XOM). Chevron will release fourth-quarter numbers Jan. 28. Third-quarter net income declined 1.7% to $3.8 billion. Earnings per share fell 2.6% to $1.87. Revenue grew 7.6%. The operating margin rose from 11% to 12%. Chevron's stock sells for a trailing earnings multiple of 11, a forward earnings multiple of 9.3, a book value multiple of 1.8 and a sales multiple of 1, 44%, 51%, 59% and 68% peer discounts. A hefty 76% of analysts rate Chevron "buy." It ranks third-highest among Dow stocks. Chevron's dividend has grown 10% a year, on average, over a five-year span.
3. AT&T ( T) is a diversified telecom company, with wireline and wireless units. The recent loss of Apple iPhone exclusivity has hurt AT&T's stock, which has fallen 3.1% in a month. AT&T will report fourth-quarter results Jan. 27. Third-quarter adjusted profit of 55 cents narrowly exceeded researchers' consensus forecast and sales beat expectations by 1.1%. Analysts give AT&T generally positive reviews. It receives 22 "buy" ratings and 17 "hold" recommendations. No researchers rank it "sell." Credit Suisse offers a 12-month target of $35, suggesting 24% upside. Sanford Bernstein, on the other hand, expects a drop to $25. AT&T is the highest yielding Dow stock.
1. Bank of America ( BAC) is a diversified financial-services company with commercial and investment banking operations. It will report fourth-quarter results Jan. 21. Bank of America's third-quarter loss multiplied to $7.3 billion, or 77 cents a share. Revenue declined 2%. The operating margin widened from 11% to 31%. Bank of America's cash-flow multiple, at 1.3, is lowest in the Dow and represents a huge 88% industry discount. It is expected to multiply its dividend in 2011 as economic growth picks up. Its current 0.3% yield is among the lowest in the Dow. Currently, 62% of analysts rate the stock "buy." Raymond James expects the stock to rise 60% to $24.