Recommended Reading: Dividend Stocks for Dummies

Easy Investing Strategies is starting a new series of posts related to stock research and stock picks. We will be tracking our selected stock picks, and all stock selections will be done using the Easy Investing Strategies outlined on our site.

To start off our research, we dove into  a stock screen using a criteria we should hold all reputable companies to.  First, we selected companies that currently pay a 5% dividend or higher.  To understand how you can further benefit from dividend stocks, read our post High Dividend Investing post.  Second, we selected only companies that had zero debt, and had cash balances on their latest balance sheet of $100 million or more.

As expected, the results produced a large number of companies known as REIT’s.  REIT’s are Real Estate Investment Trusts, and usually have high dividends due to the law that REIT’s must pay out a large portion of their earnings each quarter as dividends to their shareholders.  Since the real estate market is still depressed in most areas due to the sluggish economy, we decided to remove all companies that are REIT’s from our list.  This left a few interesting companies left over.

Himax Technologies, Inc. (HIMX) is the first company that caught our eye.  Their current dividend payout is at 9.8% based on the most recent closing stock price, and they have $161 million cash on hand.  The 52 week stock price ranged from $2.16 to $3.58 per share.  The narrow trading range was also something that we liked as it meant the stock is less of an overall risk.  Sometimes stocks have high dividends because their stock price drastically drops, making it more volatile and a higher risk choice.  Himax Technologies shows more stability in the stock price, making it a better choice.  Himax Technologies designs, develops and markets flat panel displays.  Based on the number of flat panel monitors, TV’s, and mobile handsets in the market today, there is no foreseeable end to the consumer demand for Himax Technologies flat panel display technology.  Easy Investing Strategies is giving Himax Technologies a high recommendation.

Garmin Ltd. (GRMN) is another company that stuck out on our stock screen.  The dividend currently sits at 5.4% with $1.192 billion of cash.  The company has recently introduced the Garminfone, which combines GPS features from the mainstream Garmin GPS models, and a mobile phone together.  Garmin seems to be keeping up with the latest technology, and with a decent dividend and loads of cash, Easy Investing Strategies highly recommends them.

After our highly selective stock screen and analysis of resulting companies, Easy Investing Strategies top pick is Himax Technologies (HIMX).  This is due to its low stock price, excellent dividend, and visible demand for their technology in the marketplace.

Disclosure: Easy Investing Strategies does not own or hold Himax Technologies or Garmin Ltd. stock.

A high dividend yield stock is generally a stock that produces a dividend greater than 6%, or which falls within the top 10% of dividend stocks when searched and ordered by dividend percent.  The dividend percentage is determined by taking the annual dividend amount the company pays out, and dividing it by the stock price.  For example, if stock XYZ has a yearly dividend of $0.78, and it’s stock price is $10.00, the dividend yield is currently (0.78/10) = 7.8%.  Since this is higher than 6%, and money market funds generally pay out interest in the 4 – 6% range, this would be considered a high dividend stock.  It’s also worth noting that as the stock price declines, the dividend yield will increase.  This assumes the company will not lower their dividend pay out, which is why it is important to review the company financial balance sheet and EPS history verses future predictions.

There are several methods that can be used to search for high dividend stocks.  Many financial web sites contain stock screening features that include sorting and searching on a stock’s dividend.  The MSN Stock Search site is a very useful tool for searching and identifying high dividend stocks.  Another method is to use the local newspaper or Wall Street Journal to visibly search for high dividend payouts by scanning the dividend column.  Create a list of stocks symbols you have found, the current price, and dividend.  This will give you a starting point for doing further research to find stable companies that will continue to pay out hefty dividends for the long run.

Investing in financially stable high dividend stocks provides two benefits to the individual investors.

1. A quarterly income stream is established that can offset any decline in stock price during bear markets or short downturns
2. When stocks rebound from downturns or bear markets, quarterly dividends magnify the overall profit.  The quarterly dividend is paid out to shareholders in addition to the stock price appreciation.

High dividend investing is a stable and proven approach to establishing recurring income and offsetting loses during downturns in the stock market.  This makes high dividend stocks an essential addition to any individual investors portfolio.