Searching for the highest paying dividend stocks that are from quality companies can be a daunting task. While it is not too difficult to run a free stock screening tool online looking for stocks with the highest yielding dividends - the corresponding results can be very misleading. Dividend yields can often be skewed by financial troubles at a company where the stock price has fallen significantly but a dividend cut has not been announced but is on its way. Other times, the company may offer a one-time lump sum dividend payment that skews the numbers. This is why searching for the highest paying dividend stocks as your only criteria may often hurt you more than help. Here are a few steps to follow when you are interested in finding high quality dividend stocks.
Use a free stock screening tool through your online discount broker or find one online to search for the highest paying dividend stocks. If you are interested in finding companies that pay at least a 3% dividend yield, then you simply set that criteria and run your search. Be sure to keep in mind that searching only on dividend yield can give you skewed results and include companies that appear to be paying a high yield that really are not.
2
Cross reference your selection of the highest paying dividend stocks from your stock screen with reputable resources like the Standard and Poor's list of Dividend Aristocrats. Using other lists like the S&P Dividend Aristocrats will narrow down your search to high quality companies and filter out ones with questionable financial's. While you can chase stocks that appear to have high yields, it is not recommended and should be done with caution.
3
Include additional selection criteria in your stock screen, other than dividend yield. You want to be sure to identify companies with good balance sheets that are making money when searching for the highest paying dividend stocks. Some companies (e.g. banking stocks in recent times) may appear to have huge dividends when they really don't have the cash to support them.
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Incorporate other analysis in your search process other than financial factors when looking for the highest paying dividend stocks. While technical analysis should not be used by itself to pick stocks, it can come in handy when identifying stocks on your buy list. Look for stable companies that have a history of solid growth - even in a recession!
Tips & Warnings
There are some quality stocks available that pay monthly dividends instead of quarterly dividends so be sure to include them in your criteria.
Be cautious of one-time dividend distributions that make a stocks dividend yield higher than it is.
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