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Click here for Part 1.

Here are the next seven highest-yielders of the Dow, and my opinion about them. The O-Metrix Grading System is applied where possible, as well.

(Data from finviz/morningstar and is current as of September 30 close. You can download O-Metrix calculator, here)

Jonhson & Johnson (JNJ): Merck (MRK) recently sold its 50% interest in a joint venture with Johnson & Johnson. The health product giant was trading at a P/E ratio of 15.3, and a forward P/E ratio of 12.1, as of the Friday close. Analysts expect the company to have a 6.2% annualized EPS growth in the next five years. With a profit margin of 18.3%, shareholders enjoyed a 3.58% dividend last year.

Target price indicates a 12.6% increase potential, while it has an O-Metrix score of 3.56. The stock is trading 5.57% lower than its 52-week high, whereas it returned 3.2% in a year. Debt-to equity ratio is 0.2, far better than the industry average of 0.8. Yields seem all right. Gross margin and operating margin are 69.1% and 25.9%, respectively. While ROE is 20.20%, ROI is 15.98%. Morningstar gives a four-star rating to the stock. Jim Cramer also favors Johnson& Johnson. Returning large profits is no sweat for the company in the long run.

Chevron (CVX): Chevron will unveil a solar oilfield project on Monday. It shows a trailing P/E ratio of 8.2, and a forward P/E ratio 7.1, as of September 30. Estimated annual EPS growth is 5.0% for the next five years. It pays a 3.37% dividend, while the profit margin (9.9%) is higher than the industry average of 7.1%.

Chevron returned 13.8% in the last twelve months, and it has an O-Metrix score of 5.47. Target price is $117.14, which implies a 26.5% upside potential. Earnings increased by 42.73% this quarter, and 80.93% this year. The stock is currently trading 14.96% lower than its 52-week high. Yields look great, and debts are far from being a threat. Debt-to equity is 0.1, way better than the industry average of 0.6. ROE and ROI are 21.38% and 19.40%, respectively. Analysts give a 1.3 recommendation for Chevron (1=Buy, 3=Sell). This is a stock to dive into. Read a full analysis of Chevron here.

Travelers Co. (TRV): Travelers Co. will review its Q3 2011 results via webcast on October 19. The New York-based financial shows a trailing P/E ratio of 9.3, and a forward P/E ratio of 8.3, as of the September 30 close. Five-year annualized EPS growth is 10.0%. With a profit margin of 9.3%, it offers a 3.37% dividend.

Institutions own 85.37% of the shares, and it is currently trading 22.89% lower than its 52-week high. Target price is $62.39, indicating a 28.0% upside movement potential. Travelers returned -6.4% in a year. Yields are awesome, and debts are decreasing for the last five quarters. Debt-to equity ratio is 0.3, better than the industry average of 0.5. O-Metrix score is 7.59. PEG value is 0.8, and it has a four-star rating from Morningstar. Travelers Company is a dividend pick for the next five years.

Kraft Foods (KFT): Kraft Foods is recalling about 140,000 cases of Velveeta products, as they might contain small wire bristle pieces. As of Friday’s close, Kraft has a P/E ratio of 19.8, and a forward P/E ratio of 13.6. Analysts estimate an 8.0% annual EPS growth for the next five years. Profit margin in 2010 was 5.9%, while it paid a 3.45% dividend.

Kraft returned 8.5% in the last twelve months, and its O-Metrix score is 3.42. Target price is $39.12, which indicates a 16.4% increase potential. The stock is trading 6.72% lower than its 52-week high, while it has a Beta value of 0.55. Institutions own 75.57% of the shares. Kraft Foods is yielding the same dividend since September 2008. Insiders own only 0.11% of the shares, and earnings decreased by 23.87% this year. PEG value is 1.7. SMA20 and SMA50 are -1.85% and -1.53%, respectively. Operating margin is 11.9%. While ROA is 3.22%, ROE is 8.49%. Holding would be the best bet.

Procter & Gamble (PG): Procter & Gamble has been ranked in the top 10 in The World’s Most Attractive Employers 2011 list. It was trading at a P/E ratio of 16.2, and a forward P/E ratio of 13.8, as of September 30. Estimated annual EPS growth is 9.0% for the next five years, which sounds fair when its 9.95% EPS growth of past five years is considered. Profit margin (14.0%) is better than the industry average of 11.7%, and shareholders enjoyed a 3.32% dividend.

The company had an 18.16% EPS growth this quarter, and 11.27% this year. Target price is $70.75, implying an 11.9% increase potential. O-Metrix score is 4.10, while the stock is currently trading 5.94% lower than its 52-week high. The debt-to assets ratio is slightly going down for the last five quarters. Debt-to-equity ratio is 0.3, far better than the industry average of 1.4. Procter&Gamble returned 5.4% in the last twelve months, and it has a four-star rating from Morningstar. Jim Cramer also likes the stock, as well. However, a pullback should be waited for.

JPMorgan Chase (JPM): JPMorgan went down by about 10% on Friday, on rumors of its outsized exposure to troubled Europe banks. The New York-based financial has a significant P/E ratio of 6.2, and a forward P/E ratio of 5.9, as of the Friday close. Analysts expect the company to have an 8.8% annualized EPS growth in the next five years. It offers a 3.32% dividend, while the profit margin (18.3%) is way higher than the industry average of 11.4%.

The stock is trading 36.99% lower than its 52-week high, and it has an O-Metrix score of 10.01. Institutions own 75.17% of the shares. JPMorgan returned -22.7% in a year, whereas its target price shows a 66.6% upside potential. Earnings increased by 76.81% this year. PEG value is 0.7, and analysts give a 1.70 rating for the stock (1=Buy, 5=Sell). Moreover, it has a five-star rating from Morningstar. P/E ratio, profit margin, ROE (11.0%), and debt-to equity ratio are trustworthy green flags. I guess the current price is a great entry point.

McDonald’s (MCD): McDonald’s has increased its quarterly dividend by 15%, which will be paid on December 15. McDonald’s was trading at a P/E ratio of 18.0, and a forward P/E ratio of 15.6, as of September 30. Five-year annualized EPS growth forecast is 10.0%. Profit margin (20.6%) nearly doubles the industry average of 10.5%, while it offered a 3.19% dividend last year.

Earnings increased by 11.41% this year, and 19.24% this quarter. Target price implies an about 11.1% upside potential, whereas it is trading only 3.73% lower than its 52-week high. Institutions own 69.41% of the stock. O-Metrix score of McDonald’s is 3.92, and it returned 17.1% in a year. While SMA200 is 10.42%, SMA50 is 0.72%. Yields seem all right, and cash flow is doing OK. Although McDonald’s is slightly overpriced, it is a must for the ultimate retirement portfolio. Read a full analysis of McDonald’s here and here.



Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Highest Yielding Stocks Of The Dow: Part II