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Finding great dividend stocks
Valued Contributor

Finding great dividend stocks

dividend_search.png

 

I have written before that dividends are king as the best way to measure real cash is via dividends. So, I want to go through the process of searching for high dividend yielding (DY) stock on Standard Online Shae Trading and then sorting the real from the fake.

When logged in on the menu;
Instruments  ==> filters  ==> share filters

You’re now able to search on a range of different requirements but let’s select just one option ‘dividend yield’ and greater than 5 which will return all stocks with a DY greater than 5%. At the time of writing this returns 54 stocks.

What we see is a lot of preference shares and a fair number of property stocks. Both are fine but not what I am looking for as they’re a different asset class. I want high DY shares so I delete all prefs and property and am left with 21 stocks as below.

  • VERIMARK     10.64%
  • PBT GROUP     10.63%
  • DRDGOLD     10.55%
  • GRANPRADE     7.46%
  • GAIA     6.51%
  • MMI HLDGS     6.20%
  • METROFILE     6.10%
  • B-AFRICA     5.77%
  • CMH     5.74%
  • NOVUS     5.60%
  • PAN-AF     5.56%
  • CORONAT     5.32%
  • CLIENTELE     5.31%
  • TELKOM     5.29%
  • LEWIS     5.28%
  • SIBANYE     5.20%
  • VALUE     5.13%
  • BOWCALF     5.10%
  • BALWIN     5.03%
  • ISA     5.03%
  • REUNERT     5.00%


Now the trick is to ditch those with volatile dividends or dividends under threat. Remember a DY is price and last twelve-month dividend paid so a falling share price will boost a DY but may be indicating a dividend that is under threat. I want a stable dividend.

The list includes a couple of solid chunky dividend payers; Metrofile*, MMI, Barclays Africa, Reunet, Coronation, Value, ISA, Clientele and Bowler Metcalf. Others would need a lot of digging, Grand Parade, CMH, Value al ahve decent DY but I worry about the space they operate in.

Now you can start digging into the company’s future. Are earnings likely to at least remain stable with increasing dividends? Did any special dividends boost the DY? Could a large expansion / acquisition derail any future dividends for a while? Is there a large pile of debt that could threaten dividends?

After this process, you’ll have a short list of great DY stocks with excellent dividend growth potential. That growth potential is important, ideally we want dividends growing well ahead of inflation so that the DY continues to increase against the price paid.

Simon

* the writer holds shares in Metrofile

6 Comments
Frequent Contributor

Perhaps the other question  that has to be overlayed on this - is a personal "what  is the impact of tax on dividends  for me vs the impact of CGT on a sale of  shares?"

The question being - how best after tax to realize "an income". 

 

Valued Contributor

ya DWT is a real issue and higher than CGT

Frequent Contributor

And your answer is of course the point. However - and here is the catch    - while the rates create a  positive tax arbitrage for all but about 1000 people (?) in this country - the question is  - for how long. So I think that

it is risky to plan on the assumption that that benefit will endure.....But its still a factor for the long term investor...who is willing to hold and sell. But then again maybe next year it won't be..??

Given the uncertain finances of the country tax planning is not an optional extra. SIGH.  

Contributor
Hi Simon, any recommendations regarding the same fields as this article regarding ETF's? Good ETF's with also a good DY? thanks
Valued Contributor

@Vince

easy eough to search for the ETFs ith DYs. Under the "sector is:" select Exchange Traded Funds.

 

Trick is most ETFs have modest DYs as that's were they take the fees from. PREFTX is the only above 3% albeit th eproperty ETFs are not reflecting in the search because they have incorrect DYs on the system. PTXTEN has DY around 4.4% buy system says 0.5%?!

Contributor
Shots, many thanks. Will have a look.