Step 5 in Building a Dividend Portfolio: Research

by: Dividend Monk

This is the fifth in a series of articles elaborating on the 9 Steps To Build and Manage a Dividend Portfolio.

Research is where Do-It-Yourself investors really start to get their hands dirty. A certain amount of education is needed to start doing some stock research, and continued stock research will educate a researcher over time to a more thorough degree. In addition, over time, researchers will develop a personalized framework, or efficient series of steps, for screening investments and then looking deeper into some of them.

When looking for potential investments, I approach it broadly and then focus in on specific companies that appear promising.

Screening Process

First, I begin broadly screening large numbers of companies to look for potential gems. Various investing blogs and sites can provide a lot of help here by regularly providing ideas. These can range from analysis articles to lists of potentially good investments under a common theme. In addition, there can be some amusement in perusing these sorts of materials for those that have a genuine interest in business and investing. In addition, some larger entities like Seeking Alpha, Morningstar, or the Motley Fool can provide flows of stock ideas.

Stock screens can also be a big help here. Sites like Google and Morningstar, among several others, offer stock screens. Stock screens are programs that allow you to select certain criteria to limit your search. For instance, you could look for companies with a dividend yield of over 4% with a debt/equity ratio of under 0.5, and a P/E of under 15, and get a list of companies that currently meet that set of criteria. It’s good to try several stock screens to figure out which ones you are most comfortable with, and which ones are the most powerful and precise.

Cursory Glance

Once a potentially interesting company is found, more research is necessary. The 20 Quick Ways to Check a Company are a good start.

Review the company metrics, which can be found on several sites or quickly calculated by other publicly accessible metrics. Ideally, you can quickly eliminate companies from your investing pool that are revealed to be out of the scope of your area of competency, or have a major drawback that goes against your investing style (perhaps too much debt or not enough growth).

Deeper Look

If an investment continues to look appealing at this stage, a deeper look is important. Research the history of the company. Take a look through the company website. Read the annual report and the 10k. I spend a considerable amount of time on the 10k, as information there is presented in an exhaustively thorough way. In addition, take some time to research news articles about the company, with a particular focus on looking for bad news. Also, look for subjective opinions from sources that you trust, and sources that appear legitimately well-researched. It can also be a good idea to look at company investor presentations, but keep in mind that these will generally be biased in favor of the company.

So, to recap the deeper look, be sure to research:
-Various stock and company metrics
-Company history
-Company financial materials, including the 10k, 10Q, annual report, and other materials
-News, and particularly bad news
-Subjective analysis


As you do these things and when you are finished, it’s important to document it. Develop an investing thesis, so that much of the information is preserved for future use, either when making an investment or when looking back at why an investment was not made, or when you’ve found a potential investment but wish to wait for a better price.

An investing thesis is also useful because in order to temper emotions, it’s a good idea to put a “hold” on investments after you’ve look through them. Put it down, take some time away, and then come back to it and see if you’re still interested for the same reasons. This helps diminish the emotional element. It can even be a good idea to come back and then try to construct an argument as to why you should not invest in the company. If, when all is said and done, the company remains high on your investment list, then you might have found a gem to add to your portfolio.