Best dividend paying stocks

Best stock screener ideas
for selection of best dividend stock

When trying to assess and quantify which stocks out there in the developed world are the best dividend paying stock, one has the look at multiple criteria as value is always a reflection of multiple inputs.

Let me provide for a brief and simple methodology that takes into account the most meaningful factors of value. Applying this methodology, I will put on my quant hat and build a stock screener.

Beginner stock market investing method for dividend paying stocks

1. Dividend yield - looking for dividend paying stocks, wewill naturally start with a dividend yield. In order to draw a line somewhere, we decided to select an arbitrary 6% threshold. Also, we look for stocks that have been delivering such dividend yield for past 24  months. In order to give some room fordividend raising stock, we set threshold of 5% for the preceding year.


2. Sustainability of such dividend is another crucial measure.We want to make sure that operating dividends paid out are less that operating cash flow of the company. It may look a bit rich, but this step filters out some of the bad apples.


3. Market cap of at least USD 500M .


4. No 52-week low apples. As we have time and capabilitiesconstraints to do a detailed analysis of each candidate, we have to implement some technical boundaries, such as positive total return over past 12 months and at least 5% distance from 52w lows. Doing this, one puts some faith into market signaling.


5. As return comes not only from dividends, but alsofrom capital appreciation, we provide for our results in two  different rankings. First, we order results by absolute dividend yield. Second, we add analyst expectations to the dividend yield to get expected 12 month total return.

This best dividend paying stocks screener was produced by Bloomberg terminal but similar results could be used also by free stock screener available on FinViz website.

Another viable approach, which we think is much more sensible than following the pure dividend yield, is to look at the total shareholder yield, or direct return of funds to shareholder (equivalent of dividend yield and buybacks together). If this return to shareholder is lower than free cash flow to firm generated by the company, than we would be bit cautious.

The 90-page Guide to Dividend Investing contains a wealth of information on how to profit from investing in dividend paying companies which are historically undervalued.

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These ideas and list of best dividend paying stocks I put from time to time into my Global macro research notes

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