Harry Domash's Winning Investing

Four Safe Stocks

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

Questions or comments about this site: click here

Winning Investing

199 Quail Run Road  Aptos, CA 95003

(Aptos is 'the beach' for Silicon Valley)

(800) 276-7721    (831) 685-1932   

 Popular Dividend Detective Links
Free Cash Flow: Best & Worst Monthly Dividend Stocks
 Preferred Stocks Best Closed-End Funds

About Harry Domash

Click here to read a recent interview.