Dow's Best Value Plays in 'New Normal' Economy

BOSTON (TheStreet) -- On Sept. 21, I suggested investors may do better with blue-chip stocks than with small-caps. Since then, the Russell 2000, a barometer for small-company shares, has dropped 9%, while the Dow Jones Industrial Average of the 30 biggest U.S. companies has remained flat.

Investors typically have been willing to pay a premium for growth stocks, those with the fastest earnings increases. But in a new normal economy, marked by banks' unwillingness to lend and consumers' newfound tightwad posture, investors will pay a premium for safety. These days, the best investments are established companies with international diversification and brand power.

Sifting through oodles of large-cap stocks can be draining, so here are three Dow members that offer compelling value and hefty payouts. They receive less attention than the rest of the pack, but are likely to achieve growth even if the economy struggles.

I have remained wary of AT&T(T Quote) over the past six months, not due to fundamentals such as revenue or earnings potential, but because of nagging fears the company will lose its iPhone exclusivity withApple(AAPL Quote). Those concerns are, so far, unwarranted.

AT&T's third-quarter profit declined marginally to $3.2 billion, or 54 cents a share, as revenue decreased 2% to $31 billion. AT&T's gross margin remained steady at 58%, but its operating margin slipped from 18% to 17%. The company garnered an extra 2 million wireless subscribers, the highest-ever third-quarter gain.

The wireless churn rate, a measure of customer turnover, fell to a low of 1.2%. TheStreet.com Ratings gives AT&T a financial-strength score of 8.3 out of 10, higher than the "buy"-list average of 7.1. The stock offers a dividend yield of 6.4%, more than twice the S&P 500 Index average of 2.8%. A payout ratio of 81% indicates dividend safety.