The Best Dividend Stocks Have These 7 Things in Common

  • There’s much more to finding good dividend stocks than just a high dividend yield.
  • Some dividend investors focus too much on dividend yield while growth investors assume dividend-paying stocks can’t offer big returns (not true).
  • Based on extensive research, we present a 7 point checklist for what to look for in the best dividend stocks. 


How can you find the best dividend stocks?

Research has shown that when looking for the top high dividend stocks to buy, there are two major questions to ask:

  • Is this a good dividend-paying stock?
  • Ignoring the dividend for a moment, is this a good company to buy?

In our experience, many investors pay too much attention to one question and not the other.

Sometimes they seek out stocks with high and growing dividends in order to maximize income, but ignore whether the company is growing, has good management, or is overvalued.

On the other hand, many investors search obsessively for high-growth stocks without considering the value a steady dividend could add to their long-term returns.

We believe that if you know where to look, you can find stocks that have it all; a good dividend and a good business.

When we research dividend stocks, we closely analyze the following seven criteria:

  • High Dividends: Look for companies with high dividends compared to their industry, sector, and the entire dividend-paying stock universe.
  • Payout Ratio: High dividends can be a death trap if a company can’t afford them. That’s why we analyze payout sustainability using 7 different ratios.
  • Dividend Growth: Shareholder-friendly companies have a habit of raising their dividend over time. Look closely at both recent and long-term dividend growth.
  • Financial Growth: In addition to strong dividend growth, look for strong sales, earnings, cash flow, and cash growth both recently and long term.
  • Valuation: High dividend yields often go hand in hand with undervalued companies. We check 6 different valuation ratios to make sure we’re not overpaying.
  • Low Volatility: We use 3 core measures of volatility to screen out stocks that swing wildly and focus on those that perform steadily.
  • High Quality: To determine which companies have high-quality management, you should analyze accounting practices, external financing, profitability, and several other key quality indicators.

If you buy dividend stocks that meet all the above criteria, we believe you’ll be very well positioned to outperform the market over the long term. 

In our Dividend Stock Investor portfolio, we thoroughly analyze companies from all seven angles above (and many more) before we buy their stock.

We research a wide range of proven criteria to create a model portfolio of the 25 best dividend stocks to buy now. They’re all stable, successful, high yield dividend stocks with strong top and bottom line growth.


Todd Lincoln


Passionate stock market investor with deep experience trading small cap, dividend, and growth stocks.

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