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Many investors are interested in generating income from their investment portfolios. One way to make this happen is to buy dividend stocks and collect dividends. Here's how to find dividend stocks.
Use stock screeners offered by brokerage firms
A reliable way to find stocks that pay dividends is to use stock screening tools. You'll find these in the dashboard of brokerage firms like E*Trade, Fidelity, Schwab, and TD Ameritrade. The criteria relating to dividends vary among screening tools.
Schwab's screener offers the deepest selection of criteria, such as:
- Upcoming Dividends
- Recent Dividends
- Annual Dividend Yield
- Annual Dividend Rate
- Dividend Frequency
- Regular Dividend Amount
- Coverage Ratio – TTM
- Payout Ratio – TTM
- Payout Ratio – 5 Yr Avg
- Yield – 5 Yr Avg
- Increasing or Decreasing Dividends – YOY
- 3 Year Dividend Growth Rate
- 5 Year Dividend Growth Rate
- 10 Year Dividend Growth Rate
The main criteria to identify dividend stocks is the “regular dividend amount.” You can add more criteria relating to dividends or other areas, such as company size or financial performance. So if you're looking for stocks that have increasing dividends (year over year) and ones with a certain dividend growth rate, choose the “increasing or decreasing dividends” and one of the “dividend growth rate” criteria, such as 3, 5, or 10 year.
As an example, I could select the following criteria and enter the following parameters to find dividend stocks that meet these guidelines:
- Regular dividend amount: Over $0.25
- 10 Year Dividend Growth Rate: 15% or more
- Increasing or Decreasing Dividends – YOY: Increasing (year over year)
An image of how these choices led to “matches” is below:
Click on “View Matches” to see the results. In this example, matches included Dollar General, Equifax, FedEx, and Marriott International.
Note that these choices are available only if you sign into the Schwab dashboard, which requires creating an account. This setup is similar among the firms and screening tools I tested.
Create a screener with tools on financial sites
Some financial websites also offer screening tools. Yahoo! Finance offers an easy-to-use screener that doesn't require a brokerage account. Here are the steps to identify dividend stocks using this tool:
- Go to Yahoo Finance Screener
- Select Create New Screener
- Expand Add Another Filter
- Tick the checkbox for “Last Close Indicated Dividend / Stock Price (LTM)”
- Close the filter
- Enter a value (such as $0.01) associated with the Last Close Indicated Dividend / Stock Price > greater than
- Select “Find Stocks”
Using this method, you'll find over 30,000 stocks that pay dividends. The list can be sorted by market capitalization, share price, and more. The list can also be fine-tuned by adding filters.
For example, you can view U.S. stocks only by selecting region and ticking the box for the United States, reducing the number of results to approximately 6,000. You can add more filters to get results that are more manageable and more relevant to your needs, such as filters like these:
- Total Debt/Equity – less than 50
- Return on Equity – greater than 10%
- Volume (End of Day) – greater than 500000
This screen yielded over 140 results on the day I applied the screen and 600 on another day. Dividend stocks included well-known companies like Intel, Southwest Airlines, and Hormel Foods.
Look at ETFs specializing in dividends
Some ETFs specialize in certain types of dividend stocks. To find these, look for the word “dividend” in the name of the fund. It's as easy as it sounds.
You can buy dividend ETFs if you want to invest in a group of dividend stocks. You can also use their prospectuses to identify individual dividend stocks.
First, let's find dividend ETFs. Again, perusing a list of funds is an easy way to find these investments. The best places to find ETFs are brokerage firms and ETF providers, such as iShares and WisdomTree.
For example, review the names of ETFs offered by Vanguard to find ones that specialize in dividends. Go to the iShares website and enter “dividend” in the search bar to get a list of this company's dividend ETFs. Using this approach, you'd find these ETFs and several more:
- Vanguard Dividend Appreciation ETF (VIG)
- Vanguard High Dividend Yield ETF (VYM)
- iShares Core High Dividend ETF (HDV)
- iShares Emerging Markets Dividend ETF (DVYE)
Look at the holdings of the ETFs to find individual dividend stocks. For example, top holdings in VIG and HDV include:
- Verizon Communications
Similarly, you can find individual dividend stocks by looking at the holdings of mutual funds specializing in dividends.
If you know where to look, you can quickly and easily find dividend stocks. Brokerage stock screeners are my top choice for finding dividend stocks and I especially like the one offered by Schwab for this purpose.
Are you looking for dividend stocks? Do you already own dividend stocks? What criteria do you consider when finding and choosing dividend stocks for your portfolio?