Just because I’m an income investor doesn’t mean I don’t like a good bargain. However, with the S&P 500 Index up about 22% year-to-date, finding bargain stocks has become more of a challenge.

If you look at price-to-earnings (P/E) multiples, you’ll see stocks aren’t exactly cheap. The S&P 500 was trading at 15 times earnings at the bottom of the 2009 market collapse, but its valuation has since risen to 24 times earnings. That’s a 60% improvement in two years.

Although the P/E ratio is used more than any other single metric to value stocks, there is another often overlooked but equally important metric: price-to-cash flow (P/CF). In fact, cash flow may be a better measure of financial health than earnings, since it provides a more accurate picture of a company’s ability to make investments and pay debts. Cash flow is calculated by taking a company’s net income and subtracting depreciation and other charges that reduce net income but don’t represent cash outlays.

Companies with strong cash flow sometimes look pricey based on the P/E ratio, but are bargains when value is calculated using P/CF. As an income investor, I actually prefer cash flow-based valuations, since low P/CF stocks are usually better able to afford dividend payments (and increases), share repurchases and acquisitions that grow the business. Also, if your preference is for “safe” stocks, then a great place to begin looking is for companies with high cash flow, low P/CF ratios and modest debt.

Here are four picks that look like bargains to me based on their safety, low P/CF ratios and impressive dividend yields. 

1. China Mobile Limited (NYSE: CHL)
P/CF multiple: 6x       
Yield: 4%   

China Mobile provides mobile telecommunications across mainland China and Hong Kong. With 883 million subscribers, the company is China’s largest mobile telecom. China Mobile plans to spend $1.5 billion this year to expand its Wi-Fi network and is also eying acquisition opportunities in Pakistan and other Asian markets.
In the past three years, China Mobile has grown sales, earnings and dividends at an 11% rate. Long-term debt is miniscule at just 1% of equity and shares yield 4.3%. Best of all, China Mobile is valued at just 5.7 times cash flow, or about half the S&P 500’s multiple of 10.3.

2. Telecom Argentina SA (NYSE: TEO)
P/CF multiple: 3x       
Yield: 7%

Telecom Argentina S.A. provides fixed-line telecommunication, mobile and Internet-related services in Argentina. The company serves about 4.4 million fixed lines, 1.3 million Internet subscribers and 16.3 million cellular subscribers. Argentina’s robust economic growth is driving demand for more telecom services, and Telecom Argentina plans to capitalize on this by investing $2.3 billion in network expansion.

Telecom Argentina’s earnings have grown 30% in the past three years, and the company reported strong gains again in this year’s first quarter, with net profits up 53% year-over-year, fueled by stronger mobile and broadband sales. Long-term debt is just 1% of equity and shares yield an impressive 6.5%. Shares appear quite undervalued, priced at only 3.2 times cash flow.

3. AstraZeneca (NYSE: AZN)
P/CF multiple: 7x       
Yield: 5%

AstraZeneca is best known for prescription drugs such as Crestor (cholesterol), Prilosec (ulcers), Nexium (heartburn) and Rhinocort and Symbicort (asthma). Like others in the drug industry, AstraZeneca faces patent expirations on some key products. However, the current drug portfolio generates huge amounts of cash flow, which gives AstraZeneca the opportunity to grow through acquisitions and new drug research and development.

In the past three years, AstraZeneca has grown earnings by 14% and the dividend by 11%. Debt is conservative, at 39% of equity, and the cash balance exceeds $7.50 per share. AstraZeneca paid annual dividends totaling $2.55 per share last year and yields 5%. The company is valued at just 6.6 times cash flow, or about half the drug industry’s average of 13.8.
 
4. Garmin Ltd. (Nasdaq: GRMN)
P/CF multiple: 9x       
Forward Yield: 6%

Garmin is the market leader in navigation, communication and information devices that incorporate global positioning system (GPS) technology. The company has a growing presence in the outdoor, fitness, marine and aviation markets and is forging partnerships with automakers to build its devices into car and truck dashboards.

While the lingering effects of the recession weakened 2010 results, Garmin posted an impressive performance in the first quarter of 2011. Revenue jumped 18% year-over-year and earnings per share more than doubled from $0.19 to $0.49. Garmin has no long-term debt and is reasonably priced at 8.8 times cash flow, which is well below the average multiple of 13.7 of industry peers. Garmin plans to pay a $2.00 cash dividend in the next 12 months, of which $1.60 will be paid in the 2011 fiscal year. At the current price, Garmin shares yield 5.9%.

Action to take–> All of these four stocks are worth further research, but my top pick for conservative investors is AstraZeneca, which has an eight year track record of dividend growth. Aggressive investors may prefer Telecom Argentina, which has the lowest price/cash flow multiple of the group and the highest yield.

P.S. One stock analyst found a company that pays nearly $0.20 for every dollar you invest — almost a 20% yield! But here’s the kicker… the yield is backed by the Federal Government. Get the full story on this cash machine and others like it here.