Given the market’s uncertain outlook, holding a
portfolio of high-dividend paying, but relatively low-risk stocks,
might be a good way to wait for better times.
Does that sound too boring?
Consider this: not only will these
stocks be less volatile than the overall market, you'll be
collecting 3% or so dividends while you're waiting for the market to
stabilize.
With that in mind, here are my ideas for using the
free and user-friendly Finviz stock screener to find such stocks.
Set-Up Stock Screener
Start by accessing Finviz (www.finviz.com)
and then select “Screener.” Finviz calls its selection criteria
“filters.”
Select “All” on the Filters bar to see the available
filters. Then use the dropdown menu associated with each filter that
you want to use to select filter values.
Start by selecting “Over 3%” using the “Dividend”
filter to limit your list to relatively high-dividend paying stocks.
Minimize Overall Risk
Since the U.S. economy is currently the world’s
strongest, use the “Country” filter and select “USA” to limit your
list to U.S.-based stocks.
Next, using the “Market-Cap” filter, specify a
minimum $300 million for “market capitalization (value of all
outstanding shares)” to rule out very small stocks, which are
typically above average risk.
Minimize Debt
Holding a stock that cuts its dividend can hurt you
two ways. First, your dividend income drops, and second, the
dividend cut news typically triggers s share price drop. But, you
can minimize your chances of holding a dividend cutter by avoiding
stocks carrying high debt. Why?
Dividend cutters are typically debt-laden firms that,
after being hit by a business slowdown, run short of the cash needed
to both service their debt and maintain their dividends.
You can use the Debt-to-Equity ratio to avoid
high-debt stocks. It compares total liabilities to shareholders
equity (book value). The higher the debt, the higher the D/E ratio.
Using the Debt to Equity” filter, specify the lowest available
value, “under 0.1.”
Profitable Stocks Only
Confining your portfolio to profitable stocks also
reduces dividend cut risk. You can do that using profitability gauge
“Return on Equity.” Simply specify “Positive” for “Return on
Equity” to avoid unprofitable stocks.
Along those same lines, use the “Payout Ratio”
filter, which compares dividend payouts to total earnings to further
minimize dividend cut risk. Specify “Under 40%” to rule out stocks
likely to cut dividends when total earnings take a hit.
Analysts Predict Future
So far, our dividend cut prevention measures have
been based on historical performance. But what if things change?
Stock analysts get paid big bucks to predict what happens next.
Confirm that analysts don’t expect an
earnings drop ahead by specifying “Positive (greater than 0%)”
earnings for both “EPS Growth This Year” and “EPS Growth Next Year.”
Also, using the Analyst Recommendation filter, select
“Buy or Better” to confirm that analysts don’t see bad news ahead.
Finally, we’ll confirm that the “smart money” players like our
picks.
Check Smart Money
The “Institutional Ownership” filter measures
the percentage of outstanding shares held by large investors such as
mutual funds and pension plans. Limit your list to stocks in favor
with these wired-in players by specifying minimum “50% Institutional
Ownership.”
Four Candidates
My screen came up with four high-dividend candidates.
Two of them are banks, and the other two develop and operate crude
oil and natural gas properties in the U.S.
• Cambridge Bancorp (CATC):
Operates 19 banking offices in Eastern Massachusetts and New
Hampshire. 3.3% dividend yield,
• First Merchants (FRME):
Operates 109 banking locations in Indiana, Illinois,
Ohio, and Michigan counties.3.2% yield,
• Northern Oil & Gas
(NOG):
Develops and operates crude oil and natural gas properties in the
Williston Basin, Appalachian Basin, and Permian Basin areas of the
U.S. 3.2% yield.
• Riley Exploration (REPX),
Develops and operates crude oil and natural gas
properties, mostly in Texas. 3.8%
yield.
As always, consider the stocks listed by a screen to
be research candidates, not a buy list. The more that you know about
your stocks, the better your results.
published 1/30/23
Earnings Growth
Forecasts
I’ve found that stock share prices track annual
per-share earnings (EPS) closer than any other single factor.
Analyst’s forecasts are the only tool available to us for predicting
future EPS growth. So, select both the “EPS Growth This Year” and
“EPS Growth Next Year” filters and specify “Over 30%,” which is the
highest available choice, for each.
High Institutional
Ownership
Institutional investors are organizations such as
mutual funds, hedge funds, endowments, etc. I’ve found that stocks
heavily owned by these savvy investors typically outperform stocks
with low institutional ownership. Specify “Over 90%” using the
“Institutional Ownership” to limit your list to stocks in-favor with
these wired-investors.
High Trading Price
Contrary to what many market players seem to believe,
higher priced stocks typically outperform “cheap stocks.” So, using
the “Price” filter, specify “Over $50” to rule out cheap stocks.
Five Candidates
My screen turned up five stocks when I ran it
last week.
•
American International Group (AIG): offers a variety of insurance
products internationally. Expected 2023 year-over-year EPS growth
40%.
•
CONSOL Energy (CEIX): produces and exports bituminous coal in the
U.S. Expected 2023 EPS growth 157%.
•
Darling Ingredients (DAR): Produces products from
waste recycling.
Expected 2023 EPS growth 31%.
•
Expedia Group (EXPE): online
travel agencies. Expected 2023 EPS growth 31%.
•
Incyte Corp. (INCY):
biopharmaceuticals. Expected 2323 EPS growth 46%.
These are my ideas, but do your own due diligence.
The more you know about your stocks, the better your results.
published 1/19/23
