Choosing a Dividend Stock Screener

The dividend stock screener you use to implement a dividend investment strategy will pretty much define if you are able to use the original rules and criteria and what variations are possible.

The most difficult feature to replicate in any dividend stock screener is the Blue Chip universe. In fact, there are no stock screeners available to retail investors with 25 years of data. And if there are not 25 years of data you will not be able to dynamically back-test your implementation or any variations.

Even if back-testing is not one of your requirements, not having 25 years of data means you will need to regularly import data to your screener. Keep in mind that each time you touch the data you run the risk of introducing an error. Probably not a show-stopper in this case, but it is extra work. Other universe requirements are spelled out on the strategy page.

Or, you could just use a variant universe.

Dividend Stock Screener Requirements

Apart from the universe, the screener must include the following as factors available for screening:

  1. dividend yield
  2. current ratio
  3. payout ratio
  4. debt/equity ratio

Honestly, these are so basic that if your screener does not offer them, you should be looking at other stock screening tools.

Notice I did not include the average high and low dividend yield.

There are 2 reasons for this:

  1. Only 1 screener offers it (Stock Investor Pro) as a pre-built factor
  2. It is unique to the Weiss approach and using dividend yield alone seemed to generate sufficient performance during back-testing. See notes in the implementation page.

Other Considerations

One thing dividend stock screeners do well is identify a list of buy candidates. Some of the more advanced products can be set to identify only the required number of candidates as well.

If your goal is simply to buy (or continue holding) only the stocks that pass the screen, nothing further is required. Any stock you own which is no longer a buy is sold.

But, if you are planning to sell only when a target is met or fundamentals deteriorate, there are two other considerations crucial to the management of any investing strategy.

1 - Portfolio Tracking

Once you select and buy stocks for an investing strategy, you need a way to track them. Tracking positions is possible directly in Folio Investing, an online broker, but that is the exception.

When you finish screening, use the watch list or portfolio tools included with the screener. Most screeners allow you to capture the stocks of choice directly from the screener results but you can always add/delete positions manually. Most portfolio tools will also permit you to display the stocks in a custom report so you can see the current state of screening criteria.

2 - Screen Portfolio for Positions to Close

Running a screen with the portfolio as the universe is not just a nice-to-have feature. It is a huge time saver and reduces the risk of error.

If your screener permits a portfolio or watch list to be the universe, it is simply a matter of building a sell (or hold) screen to identify any held position needing to be closed.

Otherwise, a work-around should be implemented as a screen against the base universe. In this case, you will determine manually if one of your positions is in the sell list.

Criteria to consider in sell rules:

  • Dividend cut or lowered
  • Payout ratio too high
  • Yield near low 7 year average yield

Notice that a sell rule should only be in place if there is a corresponding buy rule. For example, you should not have a sell rule related to yield near low 7 year average unless you have a buy rule related to yield near high 7 year average yield.

When to sell is at least as important as buying. Screening removes the emotion.

Screeners that Work

With the caveat that an alternate universe will be necessary and the average high dividend yield may not be pre-built, each of the following (in alphabetical order) will work as a dividend stock screener:

One is not necessarily better than the others. Your preferences and variations will be the deciding factor as well as the cost.

All will allow uploading a custom list or will have a proprietary list (e.g., Morningstar's Economic Moat). Stock Rover Basic is the only free screener in the list.

> Dividend Stock Screener

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