NEW YORK (TheStreet) -- Who doesn't enjoy receiving statements with dividend income every month? I know I look forward to collecting dividends with capturing strategies or with longer-term holds.If collecting big dividends was as easy as buying the highest-yielding stocks we would all be rich and holding a drink in our hand on the beach (not to mention how crowded the beach would be). Fortunately, there are methods to filter out many of the dogs with fleas, and zero in on the Best in Show. I start by examining stocks I already either trade or follow and have a large dividend. I add in a screen for large-yield stocks and add the ones that meet the following criteria:
- A stock must be highly liquid, and trade with a small bid-ask spread to avoid slippage The company must have a history of dividend payments and increases in payments The company needs to demonstrate the ability to continue paying the current dividend or more The stock chart must be in a bullish uptrend; there is no point in looking for an oversized yield if the shares are expected to drop as much or more in the next year
Shareholders receive $1.42 annually in dividend payments. Over the last five years, the dividend has grown by an average of 9.1% per year, almost as fast as the garbage piles up in my son's room. Shares are slowly but steadily climbing in the last 30 days. Shares are now 2.5% higher than last month. Based on technical analyst the chart is breaking out of recent resistance and appears ready to test the next level of resistance near $36. The moving averages are either moving higher or rounding higher.
Or maybe it can. Over the last five years, the dividend has grown 63.3% per year. The company currently pays $2.90 in dividends for a yield of 6.89%. At the same time, if growth in earnings doesn't surpass analysts' estimates a dividend cut is a real possibility. The mean fiscal year estimate price-to-earnings ratio is 17, based on earnings of $2.47 per share this year.
I use Zacks.com, WSJ.com, Tradestation, and Reuters for my data. PE is generally adjusted PE based on an average number of shares. At the time of publication the author did not hold a position in any stock mentioned. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.