Company earnings tend to tell a tidy story (if not always a happy one) from one period to the next, while changes in free cash flow can appear chaotic. Stock investors should look at both measures, especially now.

While earnings are useful for tracking growth, or the lack of it, free cash flow says more about the financial base from which future growth can occur, particularly when credit is as tight as it is now.

Earnings are an artificial vision of the money companies would make if sales and related costs always paired off neatly each quarter. In reality, the costs to make and market a widget are usually paid long before the proceeds from selling it are collected, and new widget factories are paid for with huge sums today, offset by decades of gradual sales. Free cash flow is simply the money a company collects minus what it pays in a given period. Investors are right to be impressed by a company with strong earnings growth, but ultimately real cash is what s needed to pay dividends, reduce debt and help fund expansion.

The companies below sell for less than 15 times forecast earnings and 15 times trailing free cash flow, and carry dividend yields of at least 1%.

Family Dollar

A broad spending downturn has brought Family Dollar (FDO) not only more sales, but wealthier customers. Analysts say middle- and high-income shoppers seeking bargains have migrated to the Charlotte-based seller of mostly brand-name household products. Management is responding by expanding its product assortment to appeal to customers of a wide range of incomes, and is increasing the number of private-label items it sells. That bodes well for margins. Shares trade at 13 times earnings, which seems inexpensive considering the company s steady growth and strong balance sheet it has more cash than debt.

Honeywell International

Honeywell International (HON) makes industrial products for aerospace companies, home builders, manufacturers, car makers, among other customers. None of these groups is having a banner year, and so sales for Honeywell are expected to fall 15% this year. Early forecasts call for a sales rebound next year, but management is expected to spend $800 million or so to fund the company s pension account, which will likely cause earnings to decline. There s much to like about the company, though. Many of its products, including air conditioning systems and turbochargers, can reduce energy use and should see strong customer demand and perhaps even legislative support in coming years. Debt, apart from the pension obligation, is modest. Shares sell for just 15 times next year s earnings forecast. And the dividend yield is over 3%.

Pfizer

Half of a giant dividend is still a decent dividend. Even though Pfizer (PFE) slashed its payment in January to afford its $68 billion purchase of rival Wyeth, its stock still carries a 3.6% yield. The acquisition closed in October, and analysts say Pfizer s strong marketing division is likely to boost sales of Wyeth s products. Shares of the combined company sell for just nine times earnings, suggesting investors are cautious. Perhaps they re worried that pending health-care reform will dip into drug makers profits. Indeed, the industry has agreed to cut the cost of branded drugs by $8 billion a year after new legislation takes effect. But investors, if not consumers, should find relief in a Friday report by The New York Times noting that drug makers have raised the price of branded medication by 9% over the past year, even though a broad measure of consumer prices fell 1.3%. Perhaps Big Pharma is taking a cue from banks, which are busily raising credit-card interest rates and fees ahead of legislation that promises to restrict such increases. The threat of a Congressional clampdown on profits, in the short term at least, can be plenty profitable.