How to use a Dividend Stock Screener



Table of Contents

How to Find Dividend Stocks
Stock Screener - Safety
Stock Screener - Growth
Conclusion

A stock screener is a great tool that investors can use to create a list of stocks that meet certain criteria. When I first started investing I picked stocks that I was "familiar" with. My first stock purchase was Sony. I bought Sony with no experience other than knowing the video game industry. My only analysis at the time was using the 5 year chart history. I thought "Well it's at the lowest it's been in five years so it can't get any lower." $500 was my initial investment at $15.75 a share.

Luckily for me, Sony continued to rise and I sold my 31 shares for $68.35, totaling $2,118. BUT, it was just that, LUCK! Sony could have easily continued to fall. I started to do more research into companies and ultimately settled on dividend growth investing. 12 years later, as of September 2021, I now own 4 ETFs and 12 individual companies that I've hand selected.

Dividend Growth Portfolio
My Dividend Growth Portfolio - 2021

How to Find Dividend Stocks

The first tool I used to build my portfolio was the Dividend Aristocrat list. These are dividend paying companies that have grown their dividend for at least 25 years. There are three different dividend categories I look at:


Dividend Kings - 50 years

Dividend Aristocrats - 25 years

Dividend Achievers - 10 years


Here is a list of all of the 2021 Dividend Aristocrats if your looking for somewhere to start. The reason I chose dividend aristocrats is because they’ve grown their dividends through the 2001, 2008, and 2020 market crashes. For me, that speaks to the resiliency of these companies and their ability to continue paying and raising their dividend. I chose a core group of stocks that included MMM, O, General Dynamics, and more from the dividend aristocrats list. Each stock in my portfolio has a purpose and I know why it's there. You should do the same when choosing companies or ETFs . Choose options that enhance your portfolio.


Next, I started using a stock screener to find stocks that met the metrics I was looking for. This helped me branch out to new quality companies I hadn't heard of. There were sectors that didn’t have companies I recognized so I needed a way to narrow down the list. A free screener I use for quick analysis is MarketBeat's Dividend Screener. There are other paid or more comprehensive screeners on the market. I like this screener because it's easy to use for beginners and uses fields like sector, dividend yield, payout ratio, 3-year dividend growth, and consecutive years of dividend growth. Below are two screens that I use:


Dividend Screen Focused on Safety

  • Dividend Yield: Over 2%

  • Payout Ratio: Less than 60%

  • 3 Year Dividend Growth: Over 5%

  • Consecutive Years of Growth: At least 25 years

  • Sort Results: Dividend Yield Ascending

Dividend Stocks
A few results of the Safety Screen. Source: MarketBeat

I search for companies that have a lower payout ratio of less than 60%. That level indicates these companies can continue to raise their dividend without being max'ed out financially. The reason I chose 5% growth is because I want dividend growth that beats inflation. Remember, the higher the dividend growth the faster your yield on cost rises. As previously mentioned, I like dividend aristocrats so I chose 25 years of dividend growth. The last choice I made was to sort the results with lowest yield first. I did that so my mind wouldn't jump straight for the largest yielding companies. As you can see some of the results aren't listed like CAT's payout ratio so I check those online. The screen is step one. I then analyze the stocks I like off the list using my dividend stock analysis.



Dividend Screen Focused on Growth

  • Dividend Yield: Any Yield %

  • Payout Ratio: Less than 30%

  • 3 Year Dividend Growth: Over 5%

  • Consecutive Years of Growth: At least 10 years

  • Sort Results: Dividend Yield Ascending

A few results of the Growth Screen. Source: MarketBeat

For the growth screen I shrink the payout ratio by 50%, down to 30%. This shows companies that are spending more of their cash on growth and not on their dividends. I prefer to have the companies I invest in paying dividends. This is why most of my portfolio pays them. The only company I own that doesn't is Disney, and I expect theirs to come back. I invest in traditional growth stocks like Apple and Microsoft because they also pay a small dividend. That's also why my portfolio's dividend yield is only 2.5%. I plan to transition into higher yields closer to retirement. 3-5% dividend yield is my goal. You could lower the consecutive years of dividend growth but I like 10 years because it gives you a decade of data to go off of. This screen reveals some non-traditional dividend companies like Visa, Costco, and Microsoft. Great companies with tremendous growth that also pay dividends! Remember, after you find a few companies use my dividend stock analysis to see if they meet what you are looking for.


Conclusion

Finding solid investments takes a decent amount of time. This is why I recommend newer investors or anyone who doesn't want to spend this time invest in ETFs. Once you select a quality index ETF like VOO you can then use it to invest while you slowly add individual companies to your portfolio. This allows your money to grow while you research. You want to ensure every stock in your portfolio is there for a reason and you understand why you invested in it. I usually only sell companies if they're no longer filling their role in my portfolio or there is a fundamental change to their financials.


Happy Investing!


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