DOW JONES & CO. INC. $34 (New York symbol DJ; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 83.8 million; Market cap: $2.8 billion; WSSF Rating: Above average) publishes The Wall Street Journal, which is the second most widely read newspaper in the United States. It also publishes Barron’s magazine, and over 20 smaller newspapers.

Dow Jones recently redesigned The Wall Street Journal to make it easier to read, and added more general interest features to expand its appeal beyond its traditional readership and advertisers. The company also shrank the width of the paper, which cuts its newsprint and delivery costs by roughly $18 million a year. Other cost cutting initiatives will save it $46 million a year.

Thanks to these moves, earnings before restructuring costs and other unusual items rose 13.3% in 2006, to $1.11 a share (total $92.6 million) from $0.98 a share ($81.8 million) in 2005. Revenue grew 6.6%, to $1.78 billion from $1.67 billion.

The company’s strong reputation has also helped attract customers to its own Internet sites. WSJ.com is the largest paid subscription news site on the web with 811,000 subscribers.

Dow Jones also owns the popular MarketWatch.com and BigCharts.com investment information web sites. These sites tend to attract more affluent users, which lets Dow Jones charge advertisers more than competing sites.

Another growing business for Dow Jones is specialized information. For example, its newswire division supplies real-time stock quotes and other information to roughly 300,000 display terminals worldwide. The company also earns revenue by licensing its stock indexes, including the widely followed Dow Jones Industrial Average, to mutual funds and other financial companies.

Dow Jones continues to expand these operations. It recently paid $174.9 million for the 50% of Factiva that it did not already own; Factiva provides electronic business information to over 1.6 million subscribers. Dow Jones sold six of its community newspapers for $282.5 million to pay for this purchase.

The stock trades at 23.1 times the $1.47 a share it will probably earn in 2007. That’s reasonable in light of Dow Jones’ strong brands, and the profit potential of its higher-margin electronic operations. The $1.00 dividend yields 2.9%.

Dow Jones is a buy.