Screening for Stocks With High Relative Dividend Yields
by Charles Rotblut, CFA
Many respondents to a July AAII survey said they were favoring dividend-paying stocks over pure growth or value stocks. The reasons are not surprising. The stream of income offered by dividends provides some comfort in volatile market conditions. Furthermore, Treasury yields have fallen to low levels. During July and August, yields on the 10-year note were below 3%. Dividend-paying stocks can offer comparable yields with the possibility of dividend growth and capital appreciation.
Not all dividends are created equal, however. Many companies have either cut or eliminated their dividends since 2007. Therefore, it is important that investors pay attention to how committed management has been to ensuring dividends are paid and whether the size of the dividend has increased, stayed the same or been cut.
In this article
- High Relative Dividend Yields
- Screen Performance
- Sector Breakdown
- What It Takes: Screen Criteria
- Passing Companies
- Dividend Reinvestment Plans (DRPs)
- Conclusion
Share this article
Facebook
Twitter
E-mail
SeekingAlpha
Stumbleupon
Delicious
LinkedIn
High Relative Dividend Yields
AAII tracks a high-yield screen that seeks companies with characteristics that include:
- An established history of rising dividends;
- A high dividend yield relative to its historical norm;
- Earnings growth that outpaces industry norm; and
- Liabilities below the industry norm.
To read more, please become an AAII Registered User or CLICK HERE.
Discussion
Good stuff. Been hoping to get into dividend paying shares that seem pretty reliable instead of hoping that one of these days interest rates will rise again. We have idle cash available and will use this information.
Thank you.
posted over 2 years ago by R from Maine
If the high dividend stock was in my Roth account, tax legislation
wouldn't have an impact, right?
posted over 2 years ago by Patricia from New York
Charles,
Thanks for this article and screening of high relative dividend stocks. I have been thinking about this topic actively for over a year and never quite gained a sense of confidence in choosing a safe stock. My lifetime experience with any high yielding investment has been, watch out, it's too good to be true, BOHICA. BP was one of my considerations just before the Gulf of Mexico disaster. This approach appears to reduce the risk and narrow the research field.
ROTH IRA income should be tax free baring early withdrawals.
Ed
posted over 2 years ago by Edward from Utah
most company's drips r now handled out of company and IF ONE IS NOT SPOT-ON VGILANT excessive costs can be incurred.
posted over 2 years ago by G. ed from California
Great article and idea for a stock screen. It is also important to note that the dividend yield you receive is based on the price you paid for the stock. In other words, as stock prices and dividend amounts-paid change, your personal dividend yield may no longer match the reported current dividend yield. So trading out of your current dividend paying stock for another with a higher reported current dividend yield may not be a wise decision.
posted over 2 years ago by Richard from Florida
Any changes in dividend taxes may affect sentiment towards dividend stocks. In tax-deferred account (e.g., a traditional or Roth IRA), you do not pay incur taxes on dividends received, but the value of your portfolio will be influenced by whether dividend stocks rise or fall.
Obviously, any change in tax laws will impact what you pay on IRA withdrawals and Roth IRA conversions.
posted over 2 years ago by Charles Rotblut from Illinois
These screens are good and, as you say, a starting point. Personally I favor closed end funds, usually traded as any stock on the New York Stock Exchange, such as those managed by Cohen & Steers, John Hancock, ING, and other highly professional managers. This way I can get higher yields, with leverage if I so choose, and the benefit of having professionals do the buying and selling of the portfolio held by the fund. Also, in my mix, are some preferred stocks, mostly issued by financial and real estate oriented companys, that pay fixed quarterly dividends and yield upwards of 8%. Maybe the writers of these articles think this type of investing is more (or too) risky, but it has worked well for me.
posted over 2 years ago by Jerome from Arizona
Good article, was wondering if there are any such investment vehicles in the reit are, and is there such a thing as a prefered reit,whether it be via a mutual fund or etf?
posted over 2 years ago by Raymond from Colorado
In addition to seeking high-yield dividend stocks, you can also increase the yield by writing call options against them each month. Free tutorial on covered calls here:
http://www.borntosell.com
posted over 2 years ago by Mike from California
Great article and it was what I am presently looking for. Is this Screen Model presently available?
If so where and if not when?
Thanks....
posted over 2 years ago by Leon from Texas
VOD yield is now 3.5% per morningstar, vod pays div semiaunualy. vod recent history show a low div in nov & a higher div in June. Combined for only $1 .30. for 2010. Even at a low price in July. ex $23.25 yield would be 5.6%. I have seen several div yields posted at 7% & several in 3% range in recent various publications from different publications. What is correct??
posted over 2 years ago by Robert from Pennsylvania
Larry Swedroe seems to be firmly of the opinion that dividend investing is neither fish nor fowl; that you should make a clear separation between value stocks or bonds to optimize your risk premium. How do dividend investment fans respond to this?
posted over 2 years ago by D. from Maryland
Look at Canadian Companies paying dividends in Canadian Dollars. Boosts yield for Americans. Look at MLP . Higher yields.
posted about 1 year ago by Andrew from Florida
I am surprised that the author made such a basic mistake. VOD pays dividends twice a year and not quarterly making the effective yield under 3.5% at todays price.
Missed were two companies in the same telecom space, namely AT&T and Verizon. Both with better than 5% dividend yield at todays stock price. I purchased AT&T stock in March 2011, the yield at that time was 6%.
posted about 1 year ago by Hardave from New Jersey
I think dividend stocks are going to grow in popular in the future. Any comment? I would appreciate more help from AAII in this area.
posted about 1 year ago by Nash from Georgia
I have many DRiPS, but Computershare, BNYMellon, etc. charge too much for the joy of owning them.
posted about 1 year ago by Martin from Arizona
I took my Glaxo Smith Kline stock out of the DRIP because it charged $15 quarterly. I put the stock in my Schwab account. No fees, automatic dividend reinvestment. GSK pays 5.14% annually in quarterly payments.
posted about 1 year ago by Peter from Ohio
This article has been very helpful in my
research as a beginning investor. Thank you,
posted about 1 year ago by Rosmary from Illinois
