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No. of Recommendations: 19
One possible thought: don't do that.

In the last few years, a few million other people have beaten you to the punch.
Consequently the firms you'll end up with have become very expensive and generally overvalued.
Individuals (and institutions) will do almost anything for yield.
As the saying goes, never reach for yield, especially not late in the cycle. This might not be the best time to join them.
With few exceptions (which are hard to spot), anything with a material yield these days has some problems, hidden or otherwise.

Dividends are just one *way* to get the earnings of a company, just one *way* to remove money from a portfolio.
They aren't "extra" money you get on top of the stock price returns. Remember that every time a stock pays a dividend the price drops, because it's worth less: it's the sum that counts.
Have you considered building a portfolio that contains things you just plain think will do the best, and selling shares periodically?

Sure, sometimes you'll end up selling a few shares at a bad price when valuations are oddly low.
But sometimes you'll get a crazily good price.
Over the long run, almost by definition you'll get a price at the average valuation multiple, which is reasonable.

I'm retired and most of my income comes from Berkshire Hathaway stock which pays no dividend.
But they make a lot of money, so the stock price goes up over time, and I just sell a little from time to time.
This is just an example of the general principle.
Here is a long complicated post I did a while back on a fancy method of estimating how much one could sell and still have the portfolio last forever (never drop in after-inflation value)


If you still want a way to pick firms with a good yield, there's this thread as a random suggestion
There are two versions suggested: one basic version, and a variant that requires a dividend.
To recap:
Start with 1700 stocks covered by Value Line and shown with a Timeliness rank as a sanity check
Keep only those currently paying a dividend
Of those with a reported ROE figure, take the top 30%
For each one, calculate their cash balance in excess of long term debt.
Buy equal dollar mounts of the 40 stocks with the largest net cash balances calculated that way.

If you want more yield, tune the final step.
e.g., just add a final step to take the 20 stocks sorted by [ROE times dividend yield].
You don't ever want to sort just on will get too many companies in trouble.

This will give you a set of stocks that have a passable yield, and also do pretty well over time.
If the yield isn't high enough, sell a little stock once in a while.
For example, trading each two months with 0.4% friction, this beat the S&P by 5.6%/year since 2003 in backtest.
Big firms with lots of cash and high returns on equity tend to do pretty well.

To give you an idea, the picks from last week have an average yield of 2.16% and an average ROE over 32% and an overall payout ratio of 40%.

Other than the backtest statistics, one of the ways to determine whether you're comfortable with a screen is to look at the sort of thing it picks.
Have a look and see if you'd be comfortable holding that slate.
They're not particularly cheap, with average P/E about 18.5, but that's not a crazy level given market conditions.
Your portfolio value with drop in the next bear market, but it will come back again.

Other than the dividend yield which changes with the current price, none of the other criteria changes very rapidly, so the turnover is very low.

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