To find quality, undervalued dividend growth stocks, you need to set up a dividend stock screener. This tool will help you identify stocks that are perfect for building a strong dividend growth portfolio. One popular choice is the FINVIZ stock screener, which is a free tool offering a variety of fundamental valuation options to pinpoint undervalued stocks.
Finding these stocks can be rewarding, offering long-term potential for capital appreciation alongside consistent income through dividends. I once managed to purchase Target Corporation at a yield of over 5%, and bought Boeing at $129.11 per share when it eventually rose to $344.25.
Why use a dividend stock screener? It streamlines your investment process by allowing you to set predefined criteria for identifying promising stocks. I even created a free dividend calculator you can download to help you plan your finances and explore how you could live off dividend income. Keep in mind, though, the qualitative factors require a deeper look.
For screening, I recommend the “Dividend Growth at a Reasonable Price” (dGARP) strategy. It helps you find companies with consistent dividend and earnings growth that aren’t sold at inflated valuations. The goal is to earn dividends while waiting for stocks to reach their fair market value.
To use FINVIZ or any stock screener effectively, apply criteria like:
1. Selecting stocks with dividends greater than 0%.
2. Looking for companies with a market capitalization of over $10 billion.
3. Ensuring the P/E ratio is less than 20.
4. Targeting companies with an EPS growth of more than 5% for next year and over the next five years.
5. Choosing stocks with a PEG ratio of less than 1.
6. Ensuring a payout ratio of less than 50% for dividend safety and sustainability.
Once you apply these criteria, compile a list of 20-40 dividend growth stocks to consider further. Sort them by their lowest Price to Earnings ratio to identify potential deals, but remember, a low ratio doesn’t always guarantee success—so prioritize simplicity to better assess growth prospects.
For further comparison, look at your screener results alongside the Dividend Aristocrats Index, which includes companies with over 25 years of consecutive dividend increases. If you’d rather not pick individual stocks, consider global dividend growth funds for diversification.
Remember, picking stocks is just the start. Conduct due diligence by listening to earnings calls or researching industry trends before making any investment. Investing is both an art and a science, but with the right tools and strategy, you can build a portfolio that balances growth and dividends effectively.