Finding High-Dividend Stocks with a Stock Screener

In the post-recession economic environment, as the U.S. economy struggles to return to strong growth, fixed-income investments have suffered. This has resulted primarily from the Federal Reserve’s Herculean efforts to keep interest rates low and drive consumer spending. (In theory, when savings yields are well below the inflation rate, consumers will choose to spend dollars now rather than keep them and see them decrease in value. We will not debate the validity of this theory here.

The ten-year Treasury note yield has lingered at or below 2% for some time now, money market and other savings accounts pay next to nothing, and even corporate bonds are weak since they simply pay a risk premium over the underlying Treasury bond rate.

These conditions have sparked investor interest in an alternative source of income: dividend stocks. Here we’ll discuss how to use a stock screener to find solid dividend stocks and generate a pool of candidates for further analysis.

First, let’s clarify a small but important difference in defining the term “high-dividend stock.” There are stocks that pay a high dividend in absolute dollar terms—$9.46 per share annually for BP Prudhoe Bay Royalty Trust (BPT) compared to $0.20 per share annually for Books-A-Million (BAMM), for example.

However, rarely do investors analyze dividends in these terms. Far more significant is the dividend yield, which is calculated by dividing the annual dividend per share by the current share price. Buying a stock with a high dividend but a low dividend yield means paying a premium price for your dividends. Conversely, buying a stock with a high dividend yield means you’re getting a bargain.

Going back to our examples, BAMM actually has a slightly higher dividend yield than BPT as of this writing (though they are within 0.10% of each other) thanks to the fact that BAMM’s price is under $3.00 while BPT is north of $120. Choosing stocks with similar dividend yields would actually produce roughly the same dollar value of dividends regardless of share price, since you would be able to buy more shares of the lower-dividend stock.

Any good stock screener—whether one provided by your brokerage or one available online—will give you the option to sort or filter by dividend yield. Here we’ll consider Financial Visualizations (, a free online option.

From the home page, select “Screener” from the menu bar. You’ll see tabs for Descriptive, Fundamental, and Technical factors. Dividend yield appears on the Descriptive tab, and gives you the option to filter by specific limits from 1% to 10% or ranges such as High and Very High.

Even such filtering will produce a tremendous number of choices. Since we just saw that similar dividend yields will produce the same quantity of dividends from a given total investment regardless of the specific stocks chosen, you should apply further analysis to the candidate pool produced by the screener.

Keep in mind that one of the main drivers of rising dividend yield is falling share price (assuming the dividend remains the same, which it will over the short term), and when a share price falls, there’s often a reason for it. It’s of no use to buy a stock for $750 worth of dividends two months from now only to lose $1,500 in share price in the same period of time.

The great thing about your screener is that you can apply multiple filters, so whether you approach your stock selection process from the fundamental or technical perspective, you can apply appropriate criteria. For example, you could apply the quarter-over-quarter EPS growth filter (found on the Fundamental tab of our sample screener) to ensure that your candidate company isn’t experiencing plummeting earnings—which would be a bad sign for both share price and the likelihood of future dividend payments.

The stock screener is a great tool for bringing together a set of selection criteria to guide your stock picking. Just remember not to get overly focused on any one indicator, like dividend yield, and develop tunnel vision that blinds you to potential problems.