5 Dividend Stocks With +3% Yields

High-Yield Opportunities

For the past 52 months, I’ve been publishing a Top 10 High-Yield Dividend Stock Watchlist on Seeking Alpha. The list is generated from a rules-based stock screening process. The long-term compounded annualized growth rate for this watchlist has been 16.53% which compares favorably to the S&P 500 (+16.46%) and Vanguards High Dividend ETF VYM 0.00%↑ (+16.26%).

Let me explain how this watchlist works, and then I’ll share with you 5 promising stocks from last month’s list.

The Process

Compiling the watchlist is a two-step process. First, I run a stock screener (Charles Schwab) to generate an initial list of stocks. Next, I gather additional data to identify the most promising opportunities.

Step 1: Stock Screener

I filter stocks using the following 10 criteria:

1. Dividend Yield: At least 2.75%

2. Exchange: Trades on the NYSE or NASDAQ

3. Payout Ratio: Less than 100%

4. Market Capitalization: Greater than $10B

5. Moat Rating: Wide or Narrow (Morningstar)

6. Stewardship Rating: Standard or Exemplary (Morningstar)

7. S&P Quality Score: B or better

8. Dividend Growth Rate: Positive 3 & 5 Year

9. Revenue Growth Rate: Positive 3 & 5 Year

10. Earnings Per Share Growth Rate: Positive 3 & 5 Year

Each month, these criteria yield a shortlist of about 20-40 stocks, a very manageable list to work with.

Step 2: Promising Opportunities

I rank shortlisted stocks based on a combination of quality and valuation.

Quality Ranking Criteria:

1. Payout Ratio of 50% or less

2. Wide Moat

3. Exemplary Stewardship

4. 3-Year DGR of 8% or more

5. 5-Year DGR of 8% or more

6. 3-Year Revenue Growth of 8% or more

7. 5-Year Revenue Growth of 8% or more

8. 3-Year EPS Growth of 8% or more

9. 5-Year EPS Growth of 8% or more

10. ROIC of 12% or more

Stocks are ranked by total points, with the 5-year dividend growth rate used as a tiebreaker.

Valuation Assessment:

For valuation, I use Dividend Yield Theory, comparing the current dividend yield to the 5-year trailing average (obtained from Charles Schwab).

Calculating Expected Rate of Return (ROR)

The final step is computing the long-term expected rate of return (ROR) for each stock:

Expected ROR = (3- to 5-year EPS forecast×75% margin of safety) + forward dividend yield + potential return to fair value (annualized over 5 years)

Selecting The Top 10 Stocks

To select the Top 10, I go down the list sorted by Quality and Valuation, choosing the first 10 stocks with an Expected ROR of at least 12%.

• If fewer than 10 stocks meet this threshold, I lower the requirement to 10% Expected ROR and continue selecting from the top-ranked stocks.

How to Use This List

This watchlist is not meant for blind investing. Instead, it serves as a shortlist of high-quality opportunities to consider each month. Since this process is rules-based and relies on assumptions (valuation and expected ROR), it isn’t perfect. However, it has identified excellent opportunities:

• 11 stocks have delivered 100%+ total returns

• 90 unique stocks have appeared on the Top 10 list over 52 months

• 77 out of 90 stocks (85.56%) have generated positive total returns (as of February 2025)

5 Dividend Opportunities

Here are five stocks from last month’s screening process that:
✔ Yield at least 3%
✔ Have an Expected ROR of 12% or more

American Tower Group AMT 0.00%↑

Merck MRK 0.00%↑

Restaurant Brands QSR 0.00%↑

Valero Energy VLO 0.00%↑

Comcast CMCSA 0.00%↑

Monthly Updates

Starting in April, I will be sending paid subscribers a copy of the spreadsheet used to compile this list. Expect the first update this evening.