10 Cheap Stocks

10 Cheap Stocks With Dependable Earnings. Bargain hunters should focus on companies that can deliver on forecasts. The evidence favors these names. SmartMoney by Jack Hough

So here are two ways to tell which firms are reliable. The first is to look for a recent dividend increase. That puts more cash in shareholder pockets, but just as important, it signals that managers are confident about future results. After all, no company wants to raise its dividend only to find the new payments unaffordable in the coming year.

The second is another statistical clue: a tight clustering of the earnings estimates issued by different analysts. Three decades of research, including recent studies by Anna Scherbina, now at U. C. Davis, show two important things about estimate dispersion. First, tightly grouped estimates are more likely than scattered ones to precede an upside earnings surprise. Second, stocks with clustered earnings estimates tend to outperform those without.

One theory on why this is so has to do with the earnings guidance that companies provide to analysts. Firms with good news to report tend to be more forthcoming with details than firms that are struggling, the thinking goes.

The 10 stocks below have modest P-E ratios and healthy dividend yields. They've also raised payments over the past year and have earnings estimates that show relatively close agreement among analysts.

COMPANY TICKER
ABBOTT ABT

ALTRIA
GROUP MO

ANALOG
DEVICES ADI

CAMPBELL

SOUP CPB

DARDEN

RESTAURANTS DRI

GENERAL

DYNAMICS GD

JOHNSON &

JOHNSON JNJ

MATTEL MAT

MICROSOFT MSFT

RAYTHEON RTN