Although many aggressive investors chase stocks that return double and triple digit gains, other investors are aggressive in other ways, seeking high income-producing stocks. Shareholders seeking dividends look in the opposite direction as those hoping for large returns. Where hot-stock watchers go for small, aggressive companies, dividend investors often pursue large, often staid companies. If you’re looking for top-dividend paying companies, you’ll have to avoid a minefield of questionable, thinly traded stocks to find those that pay a reliable, high dividend.
Find an online stock screener. Sites such as Yahoo! Finance and MSN Money offer robust screening tools to help aid your search for high-dividend stocks (see Resources). Visit a few of these sites to become comfortable with your screening options. Toggle a few of the options to focus on different sectors of the market, company sizes and indices.
Screen stocks for the highest dividend possible. Using the stock screen tool, click on the dividend button and then click on the highest dividend possible. This will create a list of stocks that are often tiny firms that don’t trade on any stock exchange. Some of these stocks paid a huge, one time dividend to investors before they ceased operation. Click on each of the highest-paying stocks and look for its trading exchange. Stocks that trade over-the-counter or pink sheets are sparsely regulated and often are risky investments to rely on for future dividend payments.
Scan stocks for a reliable index or exchange. Each of the screening tools will allow you to screen for high dividends and presence on a major stock exchange or in an index, such as the S&P 500. By adding an index you’ll find the highest paying stocks that have maintained enough reliable business to be allowed onto an exchange. Although this won’t give you a list of the highest paying stocks, it’ll give you more reliable high-paying investment choices.
Research the top dividend finds. Because stocks in a single category, such as real estate, often move in tandem, find a few stocks in different sectors to protect your dividend income stream. By using the stock screening tool to separate stocks by sector, you’ll find several lists of high dividend stocks that are better diversified than if you only screened for high dividend stocks. If your goals are far away, your asset allocation of high dividend stocks may mostly be small or international companies. For close goals, stick with a higher allocation of large company stocks.