Finding great companies that pay a regular, reliable, and growing dividend is the cornerstone of every income investor’s strategy.
This article shows you step by step exactly how to build a stock screener based on your selected dividend strategy. For an in-depth explanation of the terminology, read the dividend screening criteria section at the bottom of this article.
What is a Dividend Stock Screener?
A dividend stock screener is software that helps you sort and filter through all the companies in the stock market to find those that pay a regular and sustainable dividend. The best dividend screeners have the following criteria; Dividend Yield, Payout Ratio, Dividend Growth, Sales & Earnings, plus a 10-year history.
- Select Your Dividend Stock Screener Software
- Choose Your Dividend Investing Strategy
- Select or Build Your Dividend Screener
- Investigate & Select Dividend Stocks for Your Watchlist
- Perform Further Deep Research & Comparisons
- Purchase Stocks & Maintain Your Portfolio
To my knowledge, there is only one Stock Screener and Stock Analysis Platform on the market that will enable you to flexibly implement all of the dividend investing strategies detailed in the next section.
The Best Dividend Screener for USA & Canada Investors
The best tool for the job is Stock Rover, the Winner of our Top 10 Best Stock Screeners Comparison. Also, Stock Rover won our Best Value Investing Stock Screener Comparison.
Sign Up For A Free 14 Day Trial of Stock Rover (no card required); this will give you the Premium Plus Service for free for 14 days. You need the Premium Plus Service to access the remarkable 10-year dividend history, Fair Value, and Margin of Safety criteria, exclusive to Stock Rover.
The Best Dividend Screeners for International Investors
If you plan to build a portfolio of dividend stocks outside of the USA & Canada, you will need to select either TradingView or MetaStock.
TradingView provides detailed value and dividend stock screening for nearly every stock on the planet. Easy to use yet powerful, TradingView is an excellent choice for international investors. Try TradingView Free
MetaStock + Refinativ Xenith provides a great package of fundamental screening through Refinativ and also real-time news. Compelling technical analysis and system backtesting is also part of the package. Try MetaStock 3 Moths for the Price of 1
Here we share four possible dividend/income strategies you could adopt, and you can choose the one that is right for your investing style.
1. High Yield Dividend Strategy
The most obvious first strategy to pursue is to look for companies with the highest dividend yield. If a company has a current dividend yield of 10%, then should you expect a 10% income from your investment for that year?
The answer is maybe.
10% is a very high yield, and it could be because of several reasons. For example, the stock price may have recently dropped dramatically, which would mean the dividend yield looks a lot higher because dividend yield is the dividend payment per share dividend by the price per share.
So, in addition to a high yield strategy, you need to be able to ensure the dividend can be paid in the future, so you would look for a payout ratio that is not too high, ideally less than 60.
High Dividend Yield Stock Screening Criteria
- Market Capitalization > $500 M
- Dividend Yield > 3% < 10%
- Dividend 1 Year Change % > 2%
- Dividend 3 Year Average % > 2%
- Payout Ratio > 30 and < 60
2. Safe Dividends Strategy
If you want to ensure the dividends you are banking on are safe, then you should look for additional factors to help support the notion you will continue to receive dividends in the future.
Look for higher capitalized companies, preferably above $2 billion. Lowering your dividend yield expectations to greater than 1.5% will enable companies with sustainable dividends to appear in your scan. You might also want to drop your 1-year dividend change, 3 year and 5-year dividend average criteria to >0%. This ensures they are paying a dividend over the long term.
Make sure your stocks are floated on a major (well regulated) exchange like the LSE, DAX, NYSE, or NASDAQ.
You may also want to drop your payout ratio criteria to <50 to ensure that the company is not already paying out too much in relation to its earnings.
Finally, you will want to make sure that the company is experiencing sales growth above the dividend averages or growth. This is additional insurance so that you know sales are growing; therefore, there should not be an impact on dividends in the future.
Safe Dividends Screening Criteria
- Market Capitalization > $2000 M
- Dividend Yield > 1.5%
- Dividend 1 Year Change % > 0%
- Dividend 3 Year Average % > 0%
- Dividend 5 Year Average % > 0%
- Stocks on major Exchange (not OTC)
- Payout Ratio > 30 and < 50
- Sales Growth 5 Yr Avg > 4.5%
3. Long-Term Dividend Growth Strategy
The Dividend Kings or Dividend Aristocrats strategy essentially means investing in companies with a long history of continually paying and increasing dividends. For this, you will need a stock screener with a significantly large historical database of earnings and dividend payments, such as Stock Rover.
The criteria shown here is the calculation for a 10-year period [Y9 – Y1]. This would typically return a list of only 5% of the NYSE or NASDAQ listed stocks. Some well know names meet these criteria today, such as IBM, Texas Instruments, and Disney.
Long-term Dividend Growth Screening Criteria
- Dividend per share $ Y9 > Dividend per share Y8 > Dividend per share Y7 > Dividend per share Y6 > Dividend per share Y5 > Dividend per share Y4 > Dividend per share Y3 > Dividend per share Y2 > Dividend per share Y1
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4. Dividend Stock Screener: Value + Dividend Strategy
Looking for value stocks in addition to stocks paying dividends is a great strategy and the cornerstone of Warren Buffett and Ben Graham’s investing strategy. While you may buy stock in a company for the dividends, if the stock price is likely to go down within your holding period, the dividends might not offset the loss, so looking for value stocks that pay a dividend. It’s like buying extra insurance and avoiding unnecessary risks.
In this strategy, you want to look for inexpensive dividend-paying companies by traditional measures such as low price to earnings, price to sales, and price to book. These companies should still be growing sales and earnings.
Preferably you will want a stock scanner (like Stock Rover) to select the lowest PE Ratio’s amongst the peers in the same industry or sector, rather than selecting a fixed PE Ratio, e.g., PE Ratio < 12.
This is because a PE Ratio should only be used to compare values amongst companies in a similar industry or sector. For example, High Tech growth stocks like NetFlix typically have a high PE ratio, and contrastingly utility companies have very low PE Ratios.
Additionally, if you select Stock Rover as your screener, you will have access to an exclusive set of criteria based on the Warren Buffett value investing principles of Fair Value/Intrinsic Value and Margin of Safety.
Value + Dividend Strategy Screening Criteria
- Dividend Yield > 2
- Dividend 5 Year Average > 1%
- EPS 5 Year Avg > 8%
- Price to Book < 1.2
- Sales 5 Year Avg > 3%
- Payout Ratio < 60
- PE Ratio = lowest 2 deciles
[Related Article: 4 Steps to Build the Ultimate Warren Buffett Value Stock Screener]
In the previous section, I highlighted four specific dividend screening strategies and the potential criteria from the financial income statement and balance sheet. You can choose to implement them in your favorite stock screener as needed. Many of these criteria are available with our recommended stock screeners, but all of these are available with Stock Rover. Also, the Stock Rover team has already programmed these four strategies into the software for you. So this next section will use Stock Rover for the examples.
After you have signed up for Stock Rover, you will need simply five clicks to be up and running with the above strategies.
5 Clicks to Implement the Dividend Stock Screeners
- Click on Library – This opens a library of hundreds of pre-built screeners, portfolios, watchlists, and views.
- Click on Screener – This shows over 150 (and growing) different pre-built screeners.
- In the Search Box, type “Dividend.“
- Select the 6 Dividend Strategy Screeners highlighted in the below screenshot.
- Click Import Selected Items
You now have six key strategies available in your screener list already populated with potential investments.
Now that you have in just a few clicks set up your selected dividend screeners, you can now start the fun work of investigation and analysis.
5 Easy Steps to Investigate Your Screened Dividend Stocks
- Select Screeners (left navigation menu)
- Select the Value + Dividends Screener
- Select the view “Dividends” and then the company you want to evaluate (in this case, Microsoft Ticker: MSFT)
- In the chart window, you can Compare the stock against an index, in this case, the S&P 500. You can also plot the Dividend Yield over time
- Select the tab Dividends to see the complete Dividend History and Growth for the last 10 years
Adding Your Preferred Stocks To Your Watchlist
You can, of course, edit and tune any of the screeners you have previously imported to meet your specific needs.
Now you have a good idea of the companies you would like to analyze further.
You can simply use the following three steps to add to a new watchlist.
- Right-click the stock ticker
- Select Add to Watchlist
- Click New to create a new watchlist or use the pre-built “My Watchlist.“
Now you have your potential buy list with stocks that passed your first wave of checks. You may want to deep-dive into the company’s financials to look at debt, interest coverage, return on equity, or even the quick ratio.
Stock Rover allows you to do some compelling financial research on your selected companies. But not only that, the Stock Rover team has intelligently designed the Stock Ratings reported to enable you to compare a company against its sector and industry over time. This is called the Stock Ratings system.
Use Stock Ratings for Powerful Company Analysis
In the left-hand navigation, select Stock Ratings, and you will be presented with in-depth comparison and ratings of:
- Growth – How is this company growing in comparison with its competitors?
- Valuation – Is this company good value in comparison with its competitors?
- Efficiency – Is the company run more or less efficiently than its peers?
- Financial Strength – we look at this report below.
- Dividend Analysis – we look at this report below.
- Stock Price Momentum – shows whether the company’s stock price is historically performing better or worse than its peers.
Stock Ratings – Financial Strength Report
In figure 4, I have selected the Financial Strength tab because I need to evaluate the company’s financial health.
- We can see that Stock Rover rates MSFT with a Financial Strength Score of 73 (out of 100)
- The first chart, Financial Strength Industry Percentiles, shows that MSFT is below the industry average in Debt to Equity but higher than the average for the Interest Coverage Ratio.
- The following two charts show the 10-year trend for Total Debt to Equity and the Interest Coverage Ratio.
- In the charts at the bottom look at Peers Financial Strength Scores, you can see the excellent visualization of this company’s financial strength against its competition. This is extremely useful for uncovering potential new opportunities.
Stock Ratings – Dividend Analysis Report
In the Dividends section of Stock Ratings, we see the following interesting comparisons for Apple Ticker: AAPL.
- The Dividend Industry Percentiles chart shows that AAPL has a slightly below-average dividend yield (45th percentile) compared to the industry, but that the dividend growth is amongst the best in the industry (92nd percentile), which could be very promising.
- The Trailing Yield shows us that APPL historically keeps its dividend yield to between 1.5 and 2.5% of the stock price. Notably, the dividends were re-established in 2012, and the Dividend per Share has seen strong growth since.
- Finally, in the Peers Dividend Scores report, we see that Hewlett Packard Inc. (Ticker: HPQ) is currently offering a vastly superior Dividend Yield, but Apple’s Dividend Growth is industry-leading.
Now you have analyzed the companies you are interested in, it may be time to build your portfolio. If you need further food for thought on the topic of qualitatively analyzing a business and its industry, see this section in the article “How to Build a Buffett Value Screener,”
If you do not already have a broker, or your broker is charging you more than $1 per trade, the next section will help.
1. Select The Best Commission Free Broker
Now you have narrowed down the stocks you want to buy to build your portfolio. Remember, Warren always says:
The best time to sell is never
Although not a strict rule, it pertains more to the fact that you need to buy and hold long-term. If you have done your job well, you will not need to sell for the foreseeable future.
2. Connect Stock Rover To Your Brokerage Account To Get Dividend Portfolio Analytics
If you have indeed selected Stock Rover as your stock screener of choice, you can move ahead to connecting it to your Broker if you so wish.
Making this connection enables some excellent portfolio reporting through Stock Rover that is not usually available with most brokers.
You will still execute the trades with your selected broker, but Stock Rover will handle the portfolio performance and risk reporting.
Simply select Brokerage Connect from the left navigation menu and follow the instructions.
3. Manage Your Portfolio With Excellent Dividend Income Reporting
You can connect Stock Rover to your broker or simply add the stocks you have purchased manually or via a text file import. Either way, you will be presented with some nice portfolio reporting.
In the example below, I have selected the Warren Buffett Top 25 Holdings portfolio. This is pre-built and reflects the Top 25 companies that Warren Buffett owns.
Selecting the Value Over Time Tab, we can see the following metrics:
- This portfolio has made an annual rate of return of 7.3% over the last 10 years.
- The selection of stocks has appreciated in value by 88.1%
- The total return on investment is 116%
- The total income generated through dividends is $26 M
Dividend Stock Screener Summary
The six easy steps to building a powerful stock screener entail finding the rights stock screening software and choosing your dividend investing strategy. You follow by building your screening criteria to form your list of great companies. Finally, you perform a deep analysis and decide which stocks will for the foundation of your future portfolio.
- Dividend Yield. The percentage of the price per share a company pays out to its shareholders as dividends annually, calculated by dividing the forecasted 12-month dividend payout by the current price.
- Payout Ratio. The dividend payout ratio is Dividend Per Share as a percent of Diluted Earnings Per Share based on the TTM from the most recent quarterly report. The dividend payout ratio can be used to measure the chance of a dividend increase or cut. For example, a company with a small Payout Ratio has room to increase its dividend.
- Free Cash Flow Payout Ratio. This alternative dividend payout ratio aims to be more accurate by excluding accounting earnings and including only actual cash generation. It is calculated as Dividend Per Share as a percent of Free Cash Flow per Share, and values less than 70 are considered best. Note that the Forward Dividend Yield is used along with the TTM Free Cash Flow. (Exclusive to StockRover)
- Dividend Coverage Ratio. The dividend coverage ratio is calculated by dividing the stock’s annual earnings per share by the annual dividend. This indicates that a company can cover its dividend payments with its profits. Should be positive > 1.5
- Dividends Cash Flow. This company’s cost of payments to its common shareholders, preferred shareholders, and Noncontrolling interests over the trailing twelve-month period.
- Dividend 1‑Year Chg (%). The percentage between the last paid dividend and the corresponding dividend 1 year earlier.
- Dividend 3‑Year Avg (%). The average annual compound dividend growth for the last 3 years is based on the last paid dividend and the corresponding dividend 3 years earlier.
- Dividend 5‑Year Avg (%). The average annual compound dividend growth for the last 5 years is based on the last paid dividend and the corresponding dividend 5 years earlier.
- Dividend 10‑Year Avg (%). The average annual compound dividend growth for the last 10 years is based on the last paid dividend and the corresponding dividend 10 years earlier. (Exclusive to StockRover)
- Expected Dividend Growth Rate. The growth rate between the forward dividend per share and the trailing dividend per share. A great indication of company and analyst expectations of future dividend growth.
- Forward Dividend Growth. The percentage change in dividend per share implied by the forward yield vs. the trailing 12-month yield. This is highest when a company has just announced a dividend increase.
- Dividend Yield Industry Decile. The decile rank of the company’s Dividend Yield among all companies in the same industry. Companies with the highest yields score a 1, and the lowest yielding companies score a 10. Great for comparing companies in the same industry. (Exclusive to StockRover)
- Dividend Yield Sector Decile. The decile rank of the company’s Dividend Yield among all companies’ yields in the same sector. Companies that have the highest yields score a 1, and the lowest yielding companies score a 10. (Exclusive to StockRover)
- Dividend Per Share. The dollar amount paid per share in dividends each year is based on the trailing twelve months dividend paid, updated by the forward forecast if available. Useful to compare against the current stock price to assess your income per share.
- Next Dividend Payment Per Share. The dollar amount of the next dividend payment, quarterly or yearly.
- Expected Yearly Dividends. The expected annual dividend income, calculated as Quantity times Dividend Per Share.
- Percent of Expected Yearly Dividends. The percent of the portfolio’s expected annual dividend income from this holding. Useful to have in your portfolio view to predict future income totals. (Exclusive to StockRover)
- Dividend Frequency. The number of times per year a dividend will be paid.
- Dividend Payment Date. The payment date of the last dividend.
- Dividend Record Date. A company establishes the cut-off date to determine which shareholders are eligible to receive a dividend or distribution. Thinking of buying a stock for dividend, then purchase before this date.
- Ex‑Dividend Date. The first date following the declaration of a dividend on which the buyer of a stock is not entitled to receive the next dividend payment.
- Dividends Rating Score. The Stock Rover dividends percentile rating of a stock, where a score of 99 is best. The proprietary algorithm compares a company to its peers and considers the consistency of key dividend metrics as well as their direction of change. (Exclusive to StockRover)
- Consecutive Dividend Growth Years. The number of years in a row that the dividend per share has increased. This provides the ability to sort potential purchases on their ability to deliver consistent dividend growth. (Exclusive to StockRover)
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