Dividend Stock Screener

dividend stock screener

Welcome to our Dividend Diplomat Dividend Stock Screener!

We will list out each metric that we used, why we use it and what the benefits are.  This is another part to help show the Wonderful World of Dividend Investing!

Our goal is to each have a portfolio that ultimately covers our monthly expenditures, in order to reach Financial Freedom.  We have both spent at least the last 8+ years consistently investing into dividend paying stocks.  The Dividend Diplomat Stock Screeners helps us to find and invest into undervalued dividend stocks.

What Dividend Stocks are we purchasing?  Well, you can see from our Dividend Portfolios, the list is long.  However, especially if you are starting out, there are articles to read to be educated on a few long-term Dividend Stocks that have been around for – what seems like – forever.  See our articles below on:
1.) Top 5 Foundation Dividend Stocks
2.) Bert’s 5 Always Buy Stocks

As we are taking each step towards Financial Freedom, there are many ways we are fueling that engine.  What other ways are we talking about?  We are talking about investing into Fundrise or even using Rakuten (formerly eBates) online, a rebate shopping application.

Each dollar fuels either more dividend income or provides cash back/savings for us, where we can use the funds to purchase Dividend Stocks.  Here is our Financial Freedom Products page to see more applications/products we use!
**These products can even help you even save $500, starting… TODAY**

We use a basic dividend stock screener to help identify undervalued dividend growth stocks.  We have found it very helpful to have a consistent set of metrics to apply to all stocks.   Once a stock passes the screener stage, we begin to roll up the sleeves and perform detailed stock analyses.  Our three main Dividend Diplomat Stock Screening metrics are as follows:

Metric #1 P/E Ratio Less than the S&P 500

Price to Earnings is well documented as a quick metric to identify stocks that may potentially be undervalued. We use this to identify stocks that may be discounted compared to the overall stock market. The S&P P/E ratio is currently above 20X on any given day.  So we set our screener at a PE of <20X to identify stocks that offer a pretty decent discount from the market.  This is not the only way we use PE though. You also need industry comparisons to unlock further value of the metric. Once a stock is identified, we compare the stock’s PE to their competitors to provide an apples to apples comparison.

Read: The Importance of Updating your Price to Earnings Ratio

Metric #2 Payout Ratio of Less than 60%

Can a business sustain a business model that uses all, the majority, or EVEN MORE, than that of their earnings to pay shareholders a dividend? We do not believe so. There is a healthy balance of rewarding shareholders and reinvesting profits in the company.

The Dividend Payout Ratio is calculated by dividing the company’s dividend per share by their earnings per share.  Here is an example  Johnson & Johnson (JNJ): if they pay a $4.04 annual dividend on $7.72 of earnings, that represents a payout ratio of 52%.

Read: Dividend Payout Ratio: Explaining the Most Critical Metric

Through research, reading article, reading books, etc., we believe a Payout Ratio of <60% is a healthy ratio that will allow a company to sustain and grow its current dividend. We love finding companies that have payout ratios well below our 60% benchmark. This shows the company has a lot of room to grow their dividend in future periods. If you pair a low payout ratio with a healthy dividend yield (3-5%), we begin to salivate at the prospects of a future large dividend increase. Conversely, if a dividend ratio spikes above 60%, the stock’s current dividend growth may slow or in some cases, the dividend may be in trouble for reasons mentioned at the beginning of the section.

Here is a REAL LIFE example of how Lanny successfully identified a dividend cut reviewing a company’s dividend payout ratio. In 2014, Lanny successfully identified a future dividend-cut in FirstEnergy‘s (FE) dividend earlier in that year using this metric from our stock screener.  How?  Their dividend payout ratio at the time of the stock screener was over 100%. Within weeks, the company announced a drastic dividend cut, that slashed our forward dividend income, since we both owned shares of FE at that time.  Lesson learned. 

Metric #3 Increasing Dividends

It is important for our portfolios to invest in stocks that continue to grow their dividend. If a company’s dividend is stagnant, the yield has the potential to decrease if the stock suddenly has a period of strong price appreciation. In addition, increasing dividends is a signal of strong financial performance by the company.  Why?  More dollars become available to shareholders!

Lastly, who doesn’t love an investment that historically raises their return to shareholders? It provides a nice little increase to their annual income. Ideally, we would like to see a company grow their dividend at a rate greater than inflation to avoid losing purchasing power on future dollars. However, the growth rate greater than inflation is not the end all be all for us as we own several stocks in  our portfolios (T) that do not follow this.

Read: Importance of the Dividend Growth Rate

Read: Dividend Kings: Who and What Are They

Read: Dividend Aristocrats: Who and What Are They

VIDEO: Applying our dividend Stock Screener

We use our stock screener everytime we perform and write a dividend stock analysis. We have written many analyses on the website Seeking Alpha.  So if you are looking for other examples for our Dividend Stock Screener in action, please check out articles we have written on their website.

However, in addition to writing and performing analyses, we finally thought it would be fun to record a video about our stock screener. On our newly launched Youtube Channel (subscribe here), we published the following video explaining our stock screener in greater detail. The video talks about each metric in length and we even hop on our computers to show you how we run the screener!


127 thoughts on “Dividend Stock Screener

  1. Which resource do you typically use to find a companies payout ratio? ETrade and Yahoo Finance have slightly different numbers for payout ratio, typically a percentage or two wouldn’t make a difference for your screener but one example where it would is Coca-Cola (59% Etrade & 61% Yahoo). Do you find any of the sights you use to have more accuracy than others in terms of payout ratio?

    Also, thanks for sharing FinViz on here. Will definitely test it out.


  2. I created a website which predicts dividend yields (http://idivs.org) might be of use to you? Perhaps it’ll just make your process more complicated, either way I love to know what you think – as I am more of a risk analysis guy… Thanks.

  3. Hi DivDiplomats,

    I was tired to filter stocks throught finviz, yahoo or google stock screener. Most of these screeners were made for technical analysis more than anything. So I’ve coded a free dividend growth screener. It’s on my website at QuitYourDayJob101. It’s still in the beta phase but it’s focused on dividend growth investing only so it might interest you.

    Best regards,

  4. I would also add another metric, namely P/E. Some research indicates that low P/E stocks tend to outperform high P/E stocks over the long term. I guess this goes for dividend stocks as well.

    • Hi Paul! P/E ratio is actually included under the first metric where we compare the stocks current metrics to the broader markets. I would be interested to read your research, do you have a link to articles that you were referencing?


  5. Hi guys,
    nice site, nice portfolios you have. Maybe this dividend stock screener may be usefull, too:
    It’s a little bit like FastGraphs including a stock screener and yes, it is my little web page (start-up). First I wanted to write you an e-mail instead of comment, but I did not find you mail address.
    If you like, contact me.
    May rising dividends be with you both!

  6. This site is just gret. I’ve search these info a great deal and I view it that is good written, easy to understand.

    I congratulate you for this article that I’ll tell to people around.
    I ask you to recommend the gpa-calculator.co site
    where each pupil or learner can find ratings grade point
    average marks. Be great!

  7. What do you think about long term debt ? I think We should check whether its going to be hard to keep up with dividend increse plus managing the debt.

    • Sagar,

      We consider debt and have written about some of the pros/cons of debt in the past. But it is not our primary screener. If a company passes the three metrics, we will review to make sure that debt levels don’t appear too high and could potentially lead to a dividend cut.

      Thanks. Hopefully this helps!


  8. For Metric #3 – Increasing Dividends, what is the equivalent metric in finviz to determine if a company has had a history of increasing dividends over time?

  9. I completely agree on the metrics, and find it refreshing that you ‘only’ stick with 3.

    A quick question as I debate with myself to invest in them or not. With metric 2 you quickly screen out REITs. I have looked at O that has increased its dividends since 1996. What are your thoughts on REITs and sometimes going against your metrics?

    Thank you

  10. Important to have a clear criteria for selecting stocks.
    To get data I like to use Morningstar, Gurufocus and SeekingAlpha.

    Personally, I use 13 ratios in total, some very similar to yours.

    Wish everybody successful dividend investing!:)

Leave a Reply

Your email address will not be published. Required fields are marked *