Wall Street continues its unpredictable dance with both positive and negative news, driving the market in unusual directions. Although the prospect of a looming recession looms, the Feds anticipate a continued bull rally throughout 2024, albeit with caution. While market movements are not completely predictable, it’s always wise to invest regularly in solid dividend-paying stocks when their valuations are appealing to weather any market volatility.
Seeking Alpha’s monthly series on Dividend Stocks meticulously sifts through thousands of U.S. listed stocks to pinpoint five secure stocks that warrant attention due to their attractive dividend yields. Aiming to cater to a spectrum of investor needs, the list is organized based on varying levels of risk appetite and income needs.
Criteria for Financial Prudence:
The Selection Process: Wall Street’s Game of Filtering
Every month, the pursuit commences with roughly 7,500 stocks listed on U.S. exchanges. Applying a multifaceted approach, stocks with a market cap of over $10 billion and a daily trading volume exceeding 100,000 shares are considered. The primary goal is to highlight dividend-paying companies with attractive valuations compared to the broader market. Companies with a dividend yield of 1.0% or higher and five or more years of dividend growth history make the initial cut, offering a narrowed pool of 600 companies.
Nevertheless, to maintain flexibility and broaden the scope, companies with exceptional dividend payment stability but less than five years of consistent dividend growth, contribute to an additional 75 companies, collectively forming a list of 404 contenders.
The subsequent stage involves amalgamating diverse data elements from a plethora of sources, including dividend history, payout ratios, revenue growth, debt ratios, and credit ratings to calculate a ‘Dividend Quality Score’ for each stock.
Narrowing Down The List: Whittling into Prudent Choices
Refining the list further involves automating the process by selecting the top 20 names based on their quality score, yielding diverse industry preferences.
In parallel, the list is sorted by five-year dividend growth and prioritizing stocks with superior credit ratings and cheaper valuations. The goal is not just to pursue high yields, but also to prioritize the safety of the dividends while adding diversification. Nevertheless, careful consideration is required, emphasizing the need for individual research.
Selection of The Top 50: Meticulous Deliberation
Efforts refine the list to approximately 50 names by automated and manual criteria, bagging highlights from criteria like dividend yield, history, and credit ratings. This meticulous process aims at culling a prudent selection to cater to varying investor needs.
Final Step: Perfecting The Finest Choices
Constructing three distinct lists of five stocks each, varying in yield, financial prudence, and risk levels, conclude the selections. The aim is to ensure each list is diversified across sectors and industry segments, extending the flexibility to suit individual investor needs.
If amalgamating the three lists and removing duplicates, the final selection is a well-rounded bouquet of dividend stocks featuring an attractive average yield, discount from 52-week highs, and average dividend growth.
The monthly pursuit entails meticulous efforts to present a curated selection of dividend stocks tailored to meet varied financial objectives. The provided diversification and categorization encapsulate the spectrum of investor needs, emphasizing yield, financial prudence, and risk appetite.