I always check payout ratio (i.e. can they afford to keep paying these dividends) and dividend growth and history.JR8 wrote:... as I'm wondering around my various spreadsheets this a.m. I came upon this old note, re selecting a stock...
'Take top three highest yielding share in each sector, and sift via these following criteria:
prospective yield >= 4% [mine currently are on 3.7-6.5%, net 5.4%, these things naturally ebb and flow, but you want 4% as an 'entry criteria']
prospective P/E <10>= £500m
dividend cover >= 1.2+'
That's the core of it. You can add 'Rising dividends for at least 3+ years', net 'Broker outlook' better than neutral, and so on, but already the above/latter are going to trim an index right down!
Sift with those criteria and the stocks pretty much pick themselves...
p.s. Oh and I'd add, consider carefully candidates that appear just too good to be true. Look into 'Directors Deals', and the past 6 months headlines. I.e. if something reputable is promising anything over say 6% I'd really want to be persuaded why.
... all the above applies directly to the UK market. But the general principles will carry over elsewhere, just you'd need to define appropriate local 'hurdle criteria'...
Currently in Australia only two stocks satisfy my criteria CBA and FLT. carsales.com.au is close. CCA not far off either.