Stocks that pay dividends offer investors a little extra for their money. A dividend is a sum, determined by the company's board of directors, that is paid to stockholders out of the company's earnings. Dividends offer investors a chance to benefit from their stock without selling it, and can make a stock with steady prices more attractive to buyers. Companies that offer dividends to their stockholders are often considered stronger and more stable than those that do not, particularly if the dividend amount increases over time.
So how do you go about finding dividend paying stocks? One option is to subscribe to a service that provides lists of stocks with dividends. However, these lists can be costly, and usually the same information is available by using a stock screener. Free stock screeners are offered online at Web sites like MSN (moneycentral.msn.com/investor/finder/customstocksdl.asp) and Google (www.google.com/finance/stockscreener). By taking a little time to learn how to use them, you can do your own research to find stocks that pay dividends.
These stock screeners allow you to search for stocks using different criteria, like dividend yield. A stock's dividend yield tells what percentage of the stock's share price the dividend represents, and a value of 5 percent or more is considered good. After you have a list of stocks that provide dividends, you can narrow it down by looking at the strength of the companies. Market cap, or how much all of a company's stock is worth, often reflects a company's stability. You can set the stock screener to search for stocks with dividends and a market cap of over 1 billion, which indicates a less volatile, large cap company.
Since dividends are dependent on earnings, you will want to consider the stock's earnings per share (EPS). Also, take a look the return on equity (ROE) to determine whether the stock has been profitable. You can screen for EPS and ROE using MSN.com's deluxe screener. You should research whether the company has a longstanding record of increasing dividends, as well as any circumstances, like a serious lawsuit, that may affect future profits.