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.
PBT GROUP 10.63%
MMI HLDGS 6.20%
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.