Dividend Guy’s Stock Screen

I’m not usually a fan of stock screens. I think they’re fine when looking for good prospects but I caution investors not to blindly follow them.

I do like the five criteria list at The Dividend Guy.

1. Yield above 3%. I would say “above market,” but 3% is a good rule of thumb.

2. Five-year dividend growth rate over 1%. Basically, a rising dividend even if it’s small.

3. ROE over 10%. Yep, that’s always good. That means a company is probably healthy.

4. Five-year income growth over 1%. This one I’m not so sure about. The problem, of couse, is that the last five years have been very atypical. Many well-run companies have seen their profits plunge.

5. Dividend payout under 75%. Meaning less than three-fourths of their profits should be paid out. That’s good because it would eliminate companies that don’t have confident plans for future growth.

The longer I invest, the more impressed I am with dividends. There are several reasons why. They’re easy to follow. Unlike accounting earnings, you know exactly what you’re getting. Dividends also tend to be “sticky,” meaning most companies have an implicit promise to maintain their dividend at the same level, or possibly increase it.

Posted by on September 26th, 2012 at 4:03 pm

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.