How To Find Dividend Paying Stocks
by | Posted 2.12.2013 | Post Comment (1 Comment)

 

Investing has become easier for everybody now that we have the internet. The information is easily accessible, trading with a brokerage account has never been more simple and finding stocks with free screeners can be done by a 5th grader. But the fact that information has never been so accessible doesn’t make you a pro-trader and doesn’t guarantee that you will succeed investing.

 

In fact, I would be tempted to say that we sometimes have too much information. This confuses investors and leads them to bad decisions. Do you think it’s better to chase high yield dividend paying stocks or is it better to buy a dividend aristocrat? Where is the best place to find dividend paying stocks? Once you have opened your brokerage account and you have a few thousand dollars, where do you start?

 

There are Several Ways to Find Dividend Paying Stocks

 

So where do you start to find your next dividend stock? A normal reflex would be to start with a free stock screener. If you start by looking for dividend yield, you better have a lot of spare time! Did you know that if you simply look for stocks paying over 2% in dividend yield on the US market you will find 1885 companies? If you decide that 2% isn’t enough, you’ll be happy to see your research list drops to…1369!

 

It’s obvious that one can’t go through thousands of stocks before building his portfolio. There must be a few shortcuts so you can narrow your search to less than 100 dividend paying stocks. In this article, I outline some of them so you can save time and find quality stocks to add to your portfolio.

 

Search through Dividend Stock Analysis

 

On this site alone, you have access to a few hundred dividend paying stock analyses for free. Each day, we look on dozen of websites covering dividend stocks and writing great analysis. Can you go through them in alphabetical order:

 

US dividend stocks

Canadian dividend stocks

 

The advantage of these 2 lists is the fact that you will have the possibility of reading what others think about the company before making your own decision. Bloggers and financial journalists bring another perspective and will probably guide you through your own analysis. I think it’s a great starting point to build your portfolio.

 

Dividend Paying Stock Lists

 

dividend paying stocksThere are several dividend stock lists available for free on the internet. What I like about dividend stock lists is that the screening process has already been made for you. The list creator identifies a few guidelines to respect, run the screener and pull out the list for your viewing pleasure. It doesn’t guarantee you any success but it helps narrow down your research. Here are a few lists of popular dividend paying stocks:

 

Dividend Aristocrats (must have increased dividend payouts for at least 25 years in a row)

Dividend Champions (must have increased dividend payouts for at least 25 years in a row – contains more information on stocks)

Dividend Achievers (must have increased dividend payouts for at least 25 years in a row)

 

I also make a list of the Best dividend stocks on a yearly basis. Click on the following to see these lists:

 

Best 2012 US Dividend Stocks (+12.37% in 2012)

Best 2012 Canadian Dividend Stocks (+14.69% in 2012)

Best 2013 US Dividend Stocks

Best 2013 Canadian Dividend Stocks

 

Using a Stock Screener and Build Your Own List

 

The problem with dividend paying stock lists is that you have no control on the metrics preferred to build them. You might want to look for low payout ratio only stocks or look for undervalued companies using P/E ratio or book value. If you are more of an analytic personality, you will likelywant to build your own list.

 

There are several free stock screeners that will enable you to create your own list and export it to Excel in order to play with them as you wish. My favorite stock screener is the TMX Stock Screener as it provides the information I’m looking for:

–          Both US and Canadian markets are covered

–          You can easily extract data to Excel and format it the way you like

–          You can add up to 8 metrics within the results +  unlimited filters

–          You can use Dividend yield, Dividend Growth, Sales Growth, ROE, P/E ratios and many other filters

 

If you are curious to know how I create my own dividend stock watch list, you can read this article on how to find double digit dividend growth stocks.

 

The use of a stock screener is a great help but can also become a great waste of time. There are several metrics to master and not all of them are useful depending on what you are looking for. If you plan on using a stock screener, you are better off building your investing model prior to surf around the web and lose precious time!

 

Investing Newsletter

 

Another way of finding what you are looking for is to register to an investing newsletter. I’m not too keen on reading tons of information from various sources on a weekly basis so I decided to register to a single newsletter covering Canadian stocks. It’s called the Successful Investor by Pat McKeough. It’s only $89 per year and I think it’s a great investment!

 

It’s sent once a month, about 10-15 pages long and you have great coverage of the Canadian stock market along with follow-ups on previous recommendations. I usually validate my choice (instead of using the newsletter as a starting point) before making a decision. I must admit that Pat is a very strong investor that is rarely wrong. It’s a great inspiration to find some of my picks covered by his newsletter ;-).

 

My Personal Choice

 

From the three techniques above, here’s my own process to find good dividend stock picks:

 

#1 Use a free screener with my own metrics

#2 Make a short list of 10 stocks

#3 Read about them on various blogs (using Dividend Stock Analysis)

#4 Check if it was previously analyzed in a newsletter

 

That’s a pretty simple way to find what I’m looking for. Sometimes, it doesn’t have to be complicated to be efficient!

 

  • I use a simple screener with a few criteria – yield. After I find good candidates I narrow it down by other metrics such as dividend growth, dividend increase history, PE, EPS vs. dividends, payout ratio, etc. I try to keep it simple.