Picking Dividend Stocks

Now that rates are going up, will folks abandon the dividend and income strategy? I doubt it. In picking dividend stocks, I use two services. I am associated with combining both fundamentals and technicals. One service has a definite fundamental bias. The other is more balanced and may tilt a little more to factors other than fundamentals. Many years ago, one of my clients was in the top tier mutual funds for dividend and income. They had an elegant buy and sell discipline that did much more than just a linear buy and sell discipline. It was simple. If the stock dividend yield went above a certain rate, they would buy, and if it went below a certain rate, they would sell.

All stocks were pre-selected for excellent fundamentals and put on the approved list. Their portfolio managers could then select from that list and compete with one another for performance. The elegance of the buy/sell discipline was that if dividend yield was high, the price was probably low, and they would buy on weakness automatically. Likewise for sells; as yield dropped, the price was probably going up, and they could easily sell into strength. Another by-product of this elegant system was they were always in undervalued stocks, and many would be acquired at a nice premium for big gains on a lowly dividend play.

Source: Seeking Alpha

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