Dividends can be a great source of long-term income for investors.
But to be a successful dividend investor, your analysis of a company should focus on more than just a stock’s dividend yield.
As you can see below, our stock scanner returns over 1,500 U.S. companies currently paying a dividend. But our focus is to find the best dividend stocks.
While there isn’t one metric, or criteria, that can predict whether investing in a dividend stock will be successful 100% of the time, focusing on key financial ratios can help narrow down our search.
Below are a few of these metrics:
Dividend Payout Ratio
The dividend payout ratio measures the percentage of profits a company pays to investors.
If a company is paying dividends of 100% (or in some cases more than 100%) of their net income to investors, this could be a signal that their current dividend yield is not sustainable.
It also means the Company is probably not reinvesting enough into their operations to drive future growth.
Free Cash Flow
Free cash flow measures how much cash a company generated during the year.
Publicly traded companies are required to report U.S. GAAP financial statements, which can result in timing differences between cash flow and recognizing revenue and expenses.
At times, this can lead to a company reporting positive net income, when they actually generated negative cash flows during the period.
Dividends are paid when a company has excess cash. So it’s important to not only analyze reported operating results, but also the free cash flow of a company.
Return on Invested Capital (ROIC)
ROIC measures the return a company provides it’s investors.
Suppose you could invest $1,000 in a company that would return $1,100 in one year, or $1,000 in a company that would return $1,050 in one year?
The choice is simple.
You want to invest in a company that uses your investment to grow operations and provide a high return to shareholders.
The List of Dividend Paying Stocks
With the DiscoverCI Stock Screener, we scanned for all U.S. stocks that currently pay a dividend.
The list also includes the trailing twelve month (TTM) payout ratio, free cash flow, and return on invested capital of the stock.
The list is sorted by dividend yield from high to low.
We update this list daily. Last updated: November 15th, 2019
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