Portfolio Building Blocks - How to Find Strong Dividend Paying Stocks
Stockscores.com Perspectives for the week ending October 21, 2013
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Stockscores Events in Alberta and BC
How to Find and Profit from Hot Stocks
Calgary-Vancouver-Surrey
November 12 - 16
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In this week's issue:
Stockscores Market Minutes Video
It only takes minutes to find stocks that pay dividends and have a good potential to move in upward trends. This week's Market Minutes shows you how plus provides the regular weekly market analysis. Watch the video by clicking here.
Survive and Thrive 2014 - Calgary
Tyler will be speaking at the Survive and Thrive 2014 conference in Calgary presented by Michael Campbell's MoneyTalks. The event is free from 9 until 3 (Tyler speaks at 9:05) with a paid event on FX Trading by Jack Crooks and Michael Campbell at 3 (use the discount code MKTDG to get 25% off of that presentation). For more information and to register, click here.
World Money Show - Toronto
Tyler will be doing two presentations at this year's World Money Show in Toronto. The free presentation on Thursday Oct 24 will focus on how to find hot stocks. On Friday, a paid event, Trading as a Career, What You Need to Know will run from 2 until 4. For more information and to register, click here.
Portfolio Building Blocks - How to Find Strong Dividend Paying Stocks
Many investors don't have the time to actively trade the stock market but recognize that being invested in it is necessary to build a retirement nest egg. Despite the realization that stock investing is necessary, there are fewer people invested in stocks today than at any time in the last 20 years. The 2008 correction, flash crashes and accounting scandals have many people sitting on the sidelines while the market continues to enjoy one of its great bull trends.
More investors now want stocks that pay them a dividend. How do you find stocks that offer a combination of yield and the potential for capital growth? There are two important filters in the Stockscores Market Scan tool that can help you do this.
First, the Dividend Yield filter. Found in the General Filters area, you can check the box that says "Pays Dividends" and your search will only filter for stocks that do. If you want to focus on stock that pay a dividend above or below a specific percentage, you can use the Yield >= or <= to filter as well. I like to filter for stocks that pay a dividend yield of at least 3%, this filter allows me to do that.
The second important filter is the Sentiment Stockscore. This indicator assesses whether the market is optimistic or pessimistic about the company by combining a number of common technical analysis concepts and putting a score on them. Generally, stocks that have a Sentiment Stockscore of greater than 59 have the best potential because the market is optimistic about the company.
Using just these two filters, you can set up a Market Scan that searches for stocks that have a yield above a certain percentage and a Sentiment Stockscore of 60 or higher. I like to add a liquidity filter as well, using a number of trades of greater than 200 for Canadian stocks and greater than 1000 for US listed stocks. Enter in those filters in the Stockscores Market Scan and run the scan to instantly get a list of all the stocks that fit the criteria.
I then view the charts of the stocks that the Market Scan identified. I want to focus on stocks that are just starting their trend on a weekly chart. I provide a visual explanation of this process in this week's Market Minutes video, click here to watch it.
You can do a 14 day free trial of the Stockscores Market Scan tool by registering on this page.
It is not enough to pick stocks that the market is optimistic about and have a good yield. It is also essential to manage risk by limiting the size of a loss. When you look at a weekly chart of a stock, identify the last low point on the chart, the area where stock price stopped going down and starting going up. That is the stock's floor price and the point where you should exit if the weekly chart closes below that price.
With this price in mind, you can understand the risk of the investment. If you buy a stock at $10 that has a floor price on the weekly chart at $9, you know that your downside is about 10%. Having this approach to risk management will help you to do better overall and sleep better too.
Finally, keep in mind that the amount quoted for the stock's yield is based on the company historic payout and not what is expected for the future. Company are always adjusting their dividend amounts so it is a good idea to go to the company's website and their investor relations area where you can check what news has been issued about future dividend payouts. Be wary when you see a stock with a really high dividend and a downward trend as it is likely that the company will be cutting their dividend in the future.
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The Toronto Stock Exchange 60 Index broke through important resistance last week and appears likely to start catching up with the US market which it has underperformed. This week, I ran the Dividend Scan I described above for the Canadian market:
Exchange = All Canadian
Dividend >= 3%
Number of Trades > 200
I then inspected the charts, looking for those that showed stable price patterns with rising bottoms (a sign of optimism) and good upside potential. There were a lot of good candidates, here are three from the group that I like:
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1. T.MTL
Mullen Trucking just announced their monthly dividend of $0.10, giving the stock a yield of just under 5%. Rising bottoms on the chart without a lot of price volatility shows optimism and confidence among investors.
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2. T.SGY
Surge Energy is a stock that I featured in my daily newsletter couple of months ago, it is now up almost 15% but appears likely to continue higher while its historic yield is 6.33%.
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3. T.ECI
Enercare has an historic yield of 7.21%, high enough to cast some doubt that they will continue to pay that rate. However, the chart is stable with not a lot of price volatility and rising bottoms which show the market likes what they are doing.
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References
Get the Stockscore on any of over 20,000 North American stocks.
Background on the theories used by Stockscores.
Strategies that can help you find new opportunities.
Scan the market using extensive filter criteria.
Build a portfolio of stocks and view a slide show of their charts.
See which sectors are leading the market, and their components.
Disclaimer
This is not an investment advisory, and should not be used to make
investment decisions. Information in Stockscores Perspectives is often
opinionated and should be considered for information purposes only. No
stock exchange anywhere has approved or disapproved of the information
contained herein. There is no express or implied solicitation to buy or
sell securities. The writers and editors of Perspectives may have positions
in the stocks discussed above and may trade in the stocks mentioned. Don't
consider buying or selling any stock without conducting your own due diligence.
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