Building a portfolio of individual dividend stocks takes time and effort, but for many growth investors, it’s worth it. This is especially important now that the bull market has come to an end. Here are a few tips on how to research and buy dividend stocks:
1. Find dividend-paying stocks
The list below was put together with a simple search. Other company’s such as Integrated Shipping or ZIM pays a great dividend at above 8%. But I couldn’t possibly put them all here. So it’s best to run your own screener and search for the type of company to invest in.
Many brokerage firms have a stock screener to use to find dividend paying stocks. I use Interactive broker and TD American Trade. You can screen for stocks that pay dividends on many financial sites, as well as on your online broker’s website. We’ve also included a list of high-dividend stocks below.
2. Evaluate the stock
To look under the hood of a high-dividend stock, start by comparing the dividend yields among its peers. If a company’s dividend yield is much higher than that of similar companies, it could be a red flag for other reasons. At the very least, it’s worth additional research into the company.
Then look at the stock’s payout ratio, which tells you how much of the company’s income is going toward dividends. A payout ratio that is too high — generally above 80%, though it can vary by industry — means the company is putting a large percentage of its income into paying dividends. You want to ask yourself, if they are paying so much, are they putting enough back into the company? In some cases dividend payout ratios can top 100%, meaning the company may be going into debt to pay out dividends. That is a definite red flag.
3. Decide how much of it you want to buy
You need diversification if you’re buying individual stocks, so you’ll need to determine what percent of your portfolio goes into each stock. For example, you’re buying 20 stocks, you could put 5% of your portfolio in each. However, if the stock is riskier, you might want to buy less of it and put more of your money toward safer choices. If you’re going to reinvest your dividends, you’ll need to recalculate your cost basis — the amount you originally paid to purchase the stock.
The No. 1 consideration in buying a dividend stock is the safety of its dividend. Dividend yields over 8% should be carefully scrutinized; those over 10% tread firmly into risky territory unless the company has a lot of cash flow and consistently beat on their quarterly earnings report.
Below is a list of 15 high-dividend stocks, in order by annual dividend yield. To compile this list, I took into account the dividend growth rate over the last five years and the dividend payout percentage, in addition to the dividend yield and amount.
| Symbol | Company Name | Dividend Yield |
| MO | Altria Group Inc. | 6.66% |
| OKE | ONEOK Inc. | 5.68% |
| UVV | Universal Corp. | 4.96% |
| LAMR | Lamar Advertising Co | 4.90% |
| PM | Philip Morris International Inc. | 4.71% |
| NKSH | National Bankshares Inc. | 4.48% |
| ALE | ALLETE Inc. | 4.19% |
| LYB | LyondellBasell Industries NV | 4.17% |
| NWE | NorthWestern Corp. | 4.11% |
| MMM | 3M Co. | 3.99% |
| PSX | Phillips 66 | 3.85% |
| OMC | Omnicom Group Inc. | 3.75% |
| BXP | Boston Properties Inc. | 3.53% |
| BOH | Bank of Hawaii Corp | 3.52% |
| PFG | Principal Financial Group Inc. | 3.51% |
Others I am keeping an eye on as the market turns towards a downward trend are:
TEAF at 8% dividend yield
NLY at 13% dividend yield
These two high yield stocks have been on my radar for awhile but I want to see if they choose to cut the dividend or if it’s sustainable long term before putting my money in them.
Which brokers to use?
Interactive brokers This is my referral link that can earn you up to $1000 in stocks.
