More and more people are looking at ways to invest. One way to do that is to buy dividend stocks. Finding these stocks, however, can seem like a very complex issue. Yes, investing in dividend stocks can give you a lot of profits and you can use screening programs to minimize your risks but you still need to have a baseline of understanding about what these types of stocks actually are. Having a good screener is absolutely vital to your success, so what should you look for in such a program?
Things To Look For In Dividend Stock Screeners:
First of all, look for the dividend yield. Different calculations can be used for this, so it is important to gain some understanding about the different calculations and what their results mean. Try to stick to yields of at least 4% to 5%.
Next, look for profit. Profits help drive growth inside a company and profits pay dividends into the right stocks, which means you can get more value for your money. Profitability is a hard thing to measure, however. The best indicator is the ROE (return on equity) indicator. If it is higher, it is better, very simply put. Look for an ROE of between 10% and 12% at least, although higher is even better. You can also look et EPS (earnings per share), with higher levels being better for you as well.
Then, there is debt. Good dividend stocks are found in companies that have been around and that have grown substantially. This also means, however, that they may also have a sizeable amount of debt. You have to make sure that this debt is manageable rather than crippling. What you should look for here is the debt to equity ratio. The company you are looking at should have an equity that exceeds their level of debt. That way, if their profits drop for whatever reason, they should still be able to operate. What you should look for is a debt to equity ratio that is below 5, but the lower the better.
Then, there is the market capitalization of companies. This will help you to better look at company size itself. A market cap tells you how many shares the company currently has outstanding, which are then multiplied with the current value of each share. This is a good measurement to see just how big the company is. If you want to make a dividend investment, you will want to ensure that the company is strong and stable, which means you need to find a company that is big enough. The minimum you should look for in market cap is $2 billion if you want to make a really good investment.
Last but not least, there is valuation. This will tell you what the market believes the earning stream of a company is worth. The lower the valuation, the better, because it means the stock is cheaper to buy. Usually, you will be able to tell this through the price to earnings ratio.