Screening dividend stocks is one of the most crucial aspects of becoming a successful income investor. To that end, Dividend.com has developed and refined its Dividend Screener, an advanced search tool that allows investors to screen equities using several distinct criteria, including annual dividend, sector and proprietary DARS ratings.
The Dividend Screener has several criteria for zeroing in on the top stocks. These criteria include:
- Market Cap
- Dow 30 Component
- Stock Category
- Share Price
- Annual Dividend Payout
- Dividend Yield
- Payout Ratio
- Dividend Payout Frequency
- 25-Year Dividend Increaser
- 10-Year Dividend Increaser
- Pay Date Range
- Ex-Dividend Date Range
- DARS Recommended
- Overall DARS Rating
- Relative Strength Rating
- Overall Yield Attractiveness Rating
- Dividend Reliability Rating
- Dividend Uptrend Rating
- Earnings Growth Rating
Interested in learning about when a particular stock goes ex-dividend? Check out our Ex-Dividend Date Search to find the latest ex-dividend dates of different types of securities. This is also a useful tool for dividend capture strategists.
Five Dividend Screener Searches to Watch For
Though all of these criteria offer value, we will focus on five screens that could provide the biggest bang for your buck.
1. Dow 30 companies with a high dividend yield
Blue-chips that are listed on the Dow Jones Industrial Average have already made the cut as top companies. To sweeten the pot, consider Dow 30 companies that have a dividend yield of 2% or higher. These companies not only provide a tried, tested and true business model, but a strong likelihood that they will pay out attractive profits on a regular basis.
2. Payout ratios that are lower than that of the S&P 500
The payout ratio of a company is the percentage of earnings paid out as dividends to shareholders. The average payout ratio for the S&P 500 has seemingly gone down over time to reach its current level around 33%. Typically, lower payout ratios are preferable because they indicate a sustainable business model. Investors can search for payout ratios that run lower than that of the S&P 500 using the Dividend Screener.
3. Combining sector/Industry and market cap
Two of the most critical elements of successful stock picking is combining criteria related to sector and market capitalization. Depending on the business cycle, certain sectors are more attractive than others. Combining that metric with a consideration for the overall market cap of the company (i.e., is it high enough?) can yield important considerations about your next investment.
A diversified conglomerate like 3M Co (MMM ) is a good example of this strategy in action. As a multinational business, 3M provides downside protection through its vast product line, which can be adjusted to maintain or increase cash flow at different stages of the business cycle. Through its high market cap, it also provides the size and scale to ensure adequate cash flow during lean periods. This is an attractive proposition from the perspective of dividend investors, as it ensures a certain level of payout moving forward.
Income investors looking for a quick way to build a diversified portfolio should look no further than the 25-year dividend increasing stocks. As the name implies, these companies have been increasing their dividends steadily for 25 years or more. Some of the companies on the list have been paying out consistently higher dividends for more than 60 years straight. Investors will be happy to note that several leading blue-chip companies are represented on the list, such as Coca-Cola Co. (KO ), Target (TGT ) and Chevron Corp. (CVX ).
For a more refined search, you might also want to check out the page dedicated to the 10-year dividend increasing stocks.
4. High DARS rating
Dividend.com has attempted to simplify investors’ stock selection criteria by offering the Dividend Advantage Rating System (DARS), a sophisticated algorithm that rates nearly 2,000 stocks. The model uses a set of five leading dividend metrics. By selecting a DARS threshold (say, 3.5), you can significantly reduce the time it takes to pick a quality investment.
5. Companies with strong earnings growth and solid technical indicators
Sometimes, you need to dig a little deeper to find the stock pick that is ideally suited for your portfolio. The Dividend Screener allows you to filter for companies that have reported strong earnings growth and compare them against their technical indicators (i.e., relative strength, momentum).
By looking at earnings growth, you develop a solid understanding of the company’s fundamental drivers. The technical indicators, meanwhile, provide a good overview of the short-term investment appeal of those investment opportunities. Depending on your goals and time horizon, this could be an attractive combination.
Dividend.com is routinely developing new and innovative tools to help investors execute on top dividend-paying stocks. This led to the development of the Most Watched Stocks List, which provided a ranking of premium members’ preferred equities. Learn about the list and how it can help you by reading the following informative article.
The Bottom Line
It pays to have the Dividend Screener bookmarked on your browser. When played correctly, it can help you make more informed investment decisions.