Despite their operating struggles as a result of economic slowdowns in the markets and business lines they depend on, both Intel and Caterpillar Inc. (NYSE:CAT) have shown signs of life in recent weeks. Intel is up 25% since its recent low of $19.36 reached last November. Meanwhile, Caterpillar Inc. (NYSE:CAT) has rallied more than 11% just since mid-April. The market is seemingly becoming more confident in the fact that both of these companies are in sound financial positions and should dig themselves out of their respective problems.
In addition, these companies maintain big dividend yields. Intel pays a hefty dividend yield near 4%, and Caterpillar pays nearly 2.5% to its investors. These dividend payouts compare favorably to the 2% yield that investors would get by buying the S&P 500 Index. In addition, both stocks trade for approximately 12 times their trailing earnings per share, a measurable discount to where the S&P trades, at about 18 times the index’s earnings.
Be brave and Foolish
If you’re nervous about the next downturn, nobody could blame you. The markets can be extremely volatile and there are always geopolitical risks that can derail the global economic recovery.
However, there remain cheap stocks within the Dow Jones Industrial Average that carry reasonable valuations and compelling dividend yields. You can achieve multiple layers of downside protection, as these companies haven’t rallied to the extent of the broader market, pay dividend yields in excess of the yield available on the S&P 500, and have lots of cash on their balance sheets. Brave investors with a desire for capital gain potential and steady dividend income should consider these stocks.
The article Scared by Dow 15,000? Consider These Stocks originally appeared on Fool.com and is written by Robert Ciura.
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