Harry Domash's Winning Investing



Dividend Payers for Rough Market

As you may have noticed, predicting what happens next in the stock market is harder than it looks.

So instead of trying to time the market, why not set up a portfolio of high-dividend paying stocks likely to continue paying those dividends under most foreseeable circumstances?  

By doing that, we’ll enjoy a steady income stream while we’re waiting for the market to recover. But as you’ll see in a minute, that’s only half of the story.

Strong Dividend Outlook

But first, how can we be sure that the stocks we pick will continue paying the same or higher dividends?

It’s simple! Dividends come from earnings. So, the trick is to choose stocks unlikely to experience an earnings drop. Consequently, we’ll look for stocks more likely to enjoy earnings growth than an earnings cut. We’ll win two ways if we can pull that off.

Win Two Ways

For starters, the higher earnings will ensure that these stocks continue paying, or even raise their current dividends. Even better, in normal markets, share prices track earnings per share more than any other single factor. Thus, when the market downdraft ends, the expected earnings growth, if it happens, should drive share prices higher.

Free Stock Screener

As usual, I’ll use the free and user-friendly Finviz stock screener to demonstrate how to find these stocks.  

Start at the Finviz home page (www.finfiz.com) and select “Screener.” The screener uses filters to pipoint stocks meeting your specifications. Select “All” on the Filters bar to see the available filters. Then use the associated dropdown menus to select values for the filters that you want to use.

Start by selecting “USA” using the Country filter and “over 3%” using the Dividend Yield filter to limit your list to U.S.-based high-dividend payers.

Profitability Required

Then, we’ll use profitability gauge “return on assets,” which compares net income to total assets, to isolate solidly profitable high-dividend payers. Do that by using the Return on Assets filter and specifying “Over +5%.”

Cheap Stocks Not!

Cheap stocks get that way for a reason. I’ve found that stocks trading for over $15 typically outperform lower-priced stocks. So, use the Price filter and specify “Over $15.”

Earnings Growth Essential

Earnings per-share growth is what will drive share prices higher once the market normalizes.

Specify “over 15%” for “EPS Growth This Year,” EPS Growth Next Year” and “EPS Growth Next 5 Years.”

While individual analyst forecasts are frequently wrong, consensus (average) forecasts, which Finviz uses, are more accurate, and are the best single gauge of a stock’s share price growth prospects.

Five Passing Stocks

Apollo Global (APO): private equity firm specializing in credit, private equity and real estate markets. It’s paying a 3.2% dividend yield.

Kennametal (KMT): produces tungsten carbides, ceramics, and super-hard materials and solutions for use in metal cutting and extreme wear applications. 3.0% yield.  

Medifast (MED): produces weight management and other nutritional products. 4.0% yield.

Management NRG Energy (NRG): sells energy services to customers across the U.S. and Canada. 3.1% yield.

Tapestry (TPR): markets luxury women’s clothing and accessories internationally. 3.1% yield.

The stocks turned up by any screen are research candidates, not a buy list. You still have to do your due diligence.  

published 5/23/22

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