I recently used two of Stockopedia’s Guru screens to find growth stocks at reasonable prices. Today I’m switching focus and looking for good quality dividend stocks with reasonable valuations.

Stockopedia’s Guru Screens are preconfigured screens based on the methods of successful investors. You can find them using the browse tab on the left of the screen – the Income Investing screens are here.

The top-performing income screen is the Best Dividends Screen. At the time of writing it’s delivered a cumulative gain of 315% since inception:

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This is equivalent to an annualised return of around 12% since inception, comfortably above the long-term average of c.7% from the UK market.

This chart shows the performance of the screen relative to the FTSE All-Share Index:

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One point worth noting is that this figure excludes dividend income. At the time of writing the stocks in qualifying for the Best Dividend screen have an average yield of 4%.

Assuming the screen has provided a similar rate of income since its inception, would take the total return over 12 years to around 365%, equivalent to 13% annualised.

While that’s less than some growth-focused screens have delivered since 2012, it’s a very creditable result that most investors would rightly be happy with.

In this piece I’m going to look at the rules behind the Best Dividends screen and consider a selection of the stocks highlighted by this approach.

I am also a fan of some of the other Guru income screens, so I may consider some of these in a future piece.

Screen: Best Dividends

The Best Dividends Screen is based on research by the American Association of Individual Investors.

Essentially, it’s a value investing approach that looks for stocks with dividend yields above their historic norm, and sustainable payouts.

The logic behind the screen is that by buying good quality dividend stocks at attractive valuations, investors can benefit from attractive income and capital gains as valuations revert to more typical levels.

The rules

The rules for this screen are relatively simple. Let’s take a quick look.

Div Streak >4 & Div Growth Streak >2: these rules look for companies with a track record of consistent and rising…

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