How To Find Great Dividend Stocks In 2023
A Free Guide To Finding Dividend-Paying Stocks In 3 Simple Steps
Investing in dividend-paying stocks can be a great way to generate passive income. Dividend stocks are companies that distribute a portion of their profits to shareholders as dividends. What are the benefits of dividend investing?
- Dividend investing provides reliable passive income
- Dividend-paying stocks tend to have lower risk than non-dividend paying stocks
- Potential for capital appreciation due to the financial stability of dividend-paying companies
So, as an investor, you can receive regular income from these stocks while still benefitting from potential capital gains. But with thousands of stocks available in the market, it can be challenging to identify which ones are worth investing in.
Here’s a free guide to finding dividend-paying stocks in three simple steps. Fortunately, we will be utilizing www.stockviz.com to compare companies and discover the valuable ones that we can invest in.
Step 1: Look for companies with a history of paying dividends
When looking for dividend-paying stocks, it’s essential to find companies that have a history of paying dividends consistently. Such companies are likely to continue paying dividends in the future, making them a reliable source of income. You can start by researching companies that have paid dividends for the last ten years or more.
How to find these? Well, we can spot them in the S&P 500 Dividend Aristocrats ETF. We therefor head to StockViz and we select the Benchmark tab. We then select the “ProShares S&P 500 Dividend Aristocrats ETF” in the stock selection and voilà! We have more than 58 companies that are dividend aristocrats.
Additionally, you should look at their dividend payout ratio, which is the percentage of earnings that the company pays out as dividends. Companies with a payout ratio below 50% are usually considered safer than those with a higher payout ratio.
We thus set a filter on the payout ratio metric to retain only the ones under 50%.
After selection, only 25 companies remain.
Step 2: Check the company’s financial health
The financial health of a company is crucial when it comes to investing in dividend-paying stocks. If a company is not financially stable, it may not be able to continue paying dividends.
Therefore, you should analyze the company’s financial statements, including its income statement, balance sheet, and cash flow statement. Look for companies with a positive cash flow, low debt-to-equity ratio, and a healthy profit margin. Additionally, you should analyze the company’s revenue and earnings growth rates to determine if the company is growing sustainably. Finally, try to find companies not trading at their all time high in order to leave you some breathing room.
To conduct our analysis, we have chosen the following metrics to evaluate a company’s financial performance:
- Revenue per share growth: This metric helps determine the company’s ability to increase its revenue on a per-share basis over time.
- Last 3 years average return on equity (ROE): This metric measures how much profit a company generates for each dollar of shareholder equity. We look at the average ROE over the past three years to assess the company’s long-term performance.
- Last 3 years average EBITDA ratio: EBITDA (earnings before interest, taxes, depreciation, and amortization) is a useful metric for evaluating a company’s profitability and cash flow. We examine the average EBITDA ratio over the past three years to assess the company’s operational efficiency.
- Difference from the 52 weeks high: This metric helps us understand how close a company’s current stock price is to its highest price over the past 52 weeks. By examining this difference, we can identify potential buying opportunities or assess the stock’s potential risk.
Upon closer examination, it appears that the stock ticker EPXD, which represents Expeditors International of Washington, is performing well across all the financial metrics we have chosen to evaluate its financial health.
Expeditors International of Washington is a global logistics and freight forwarding company that provides a wide range of services including customs brokerage, warehousing and distribution, cargo insurance, and supply chain management solutions.
Its strong performance across all metrics suggests that the company is managing its operations effectively and generating steady revenue growth, profitability, and cash flow. As such, it may be a promising investment opportunity for careful investors looking for companies with strong financial fundamentals and stable growth potential.
Further research on its dividend yield may be needed to fully assess the company’s strengths before making an investment decision.
Step 3: Evaluate the dividend yield
The dividend yield is the percentage of a stock’s price that the company pays out as dividends annually. It’s a crucial metric for investors looking for dividend-paying stocks. A higher dividend yield means a higher potential return on your investment. However, a high dividend yield may also indicate that the company is not reinvesting its profits into the business for future growth. Therefore, you should evaluate the dividend yield in comparison to the company’s financial health and growth potential.
As we evaluate Expeditors, several positive signs stand out. Firstly, the company has experienced consistent sales growth over time, with a corresponding steady increase in earnings per share (EPS). Additionally, the company has been reducing its outstanding share count, indicating a potential increase in future dividend payouts.
Moreover, as the company grows its EPS over time, its price-to-earnings (P/E) ratio has been decreasing, which is another promising trend. However, despite these positive signs, cautious investors should remain prudent and mindful of the potential impact of a global economic slowdown, which could negatively affect logistics businesses like Expeditors.
Careful research leads the way
In conclusion, finding great dividend-paying stocks in 2023 requires a combination of research and analysis. Start by looking for companies with a history of paying dividends consistently, check their financial health, and evaluate their dividend yield. Remember to invest in companies that are financially stable, growing sustainably, and have a reasonable dividend payout ratio.
If you’re searching for quality stocks, here’s a guide on how investors can discover valuable opportunities in today’s market:
It is important to keep in mind that this article is not intended as specific investment advice, but rather serves to educate investors about potential investment strategies and tools. As always, it is essential to conduct thorough research and analysis before making any investment decisions, and to consult with a professional financial advisor or broker if necessary.
