Using Fundamental Trends to Find Potential Dividend Investment Ideas

There’s a good reason dividend investing has become so popular with the personal finance community. In short: because it works! After all, the right portfolio of diversified dividend stock picks can help you collect income right now, and for years to come.

Plus, any reinvested dividends will go on to pay their own dividends as your capital compounds over time. It’s one of the main reason for why your net worth can snowball at ever-accelerating speeds, as dividends beget more dividends. Not bad, right?

But the question remains, particularly for newer investors, how do you find the best dividend stock picks?

So in this blog post, I’m going to share some of my favorite tips for finding high-quality dividend ideas, using free data from Sound good?

Great. Then let’s get started.

Why Morningstar Makes Dividend Investment Research Easy:

Before we dive into the particulars of investment research, we need a quality source of dividend data. While each investor has their own workflows and tools, one of my favorites is

As you’ll see in a second, Morningstar has a ton of great data available free. And the best part is, they also have historical dividend data.

This is important when you’re investing for the long-term, because you’ll want to be able to evaluate the track record of dividend payers. And Morningstar let’s you see this information for the last decade.

Let me show you where to find it, as well as how I use it.

Tips for Analyzing Historical Dividend Trends:

When you buy a dividend stock, you usually have the expectation it will continue paying (and hopefully growing!) its dividend distributions. This gives you a steady stream of income to live off, or reinvest. But how can you be sure the dividend won’t be cut?

One approach to answering this question is by looking at trends in operating results. Of course history doesn’t always repeat itself, but it’s a good starting point. And if you can find a healthy dividend track record it very well may portend more positives for the future. So how can this be done?

The first step, as you might have guessed, is to head over to and type in your stock ticker or interest. Then, you’ll want to click on the “key ratios” tab.



From here, you’ll be confronted with data going back 10 years (where applicable). And you can use this information to try and evaluate the track record of the company in question.

In particular, I’m looking for stocks with steadily growing revenue, earnings per share, and book value per share. This kind of predictable growth, year-after-year, can really give you peace of mind when you’re pulling the trigger on buying a dividend stock.

Instead of volatile and cyclical businesses with erratic payout schedules, this focus on consistency can help increase your chances of finding a good dividend growth stock. But you can’t stop there.

That’s because we still need to look at dividend payout history! Once again though, Morningstar makes this easy.



On the key stats page, notice in the example above there are rows for both dividends per share, and payout ratios. These numbers are the next piece of the puzzle that’s important to fill-in.

In particular, you probably want to see a company that has a history of increasing the dividend each year. Or at least, you’ll want to pass on companies that have cut or reduced their dividends.

The other key metric to keep a close eye on is payout ratio. This measures the percent of net income that is paid out in dividends. The idea here is that you can understand how it of a burden the dividend is for the company in questions.

Typically, I like to focus on companies that are growing their dividend each year, but maintain a payout ratio below 60%. This allows some margin of safety. Because on the other hand, if the payout ratio is too high, it’s a good bet the company will eventually have trouble growing or maintaining their dividend.

Finally, and along the same lines, take a quick look at the current yield. One mistake newer dividend investors tend to make is chasing stocks with huge current dividends. Instead, I prefer to focus on stocks with a 2-3% current yield combined with a solid track record of growth. Over time, at least in my experience, these types of companies can work out better over the long run.

Now, I realize this is a lot of information. And there are some limits in that this type of analysis isn’t forward-looking. But the main point to keep in mind is that fundamental trends in historical operating results can help you analyze potential dividend stocks to buy and get a good feel for their track record (or lack thereof!)

Plus to make this easier for you, I’ve created a checklist of my investing rules, to help make sure I’m never acting on a whim. To be honest, I don’t stick to it 100% of the time, but it’s a useful guide that you might find helpful if you’re trying to follow along with this idea at home.

On the other hand, if you want to be a little less hands-on with your investing, there are a couple of other places you can look for exposure to high-quality dividend paying stocks. In particular, you can browse the dividend aristocrats list to see companies that have paid dividends for years on end.

And if individual stocks aren’t your thing, there are also some great dividend ETFs that make it easy and affordable to get dividend exposure in your portfolio. That said, I do believe the fundamental data provided by Morningstar are an easy way to get started analyzing operating trends and identifying dividend opportunities.

If you want to learn more about how I use fundamental and technical trends to find stock market investing and trading ideas, come visit!

12 thoughts on “Using Fundamental Trends to Find Potential Dividend Investment Ideas”

  1. Thanks for posting Keith, and thank you for the kind words Lanny and Dividend Daze.

    I totally agree, the data is definitely a bit hidden, but amazed they give it all away free. I also like to export to Excel sometimes and just throw up some quick graphs to better visualize the trends (sorry, I’m a nerd).

    Thanks again for reading and commenting.
    Jay recently posted…Canadian Breakout Stock Picks – How to Find Them!My Profile

    • Hi Jay,

      These days it’s cool being a nerd 🙂 Do whatever it takes to make you feel comfortable before investing in any stock or asset class for that matter. While visualizing trends can certainly help, sometimes it’s not always a certainty that those trends will result in uncovering a dividend stock gem. Social and financial trends did not favor MCD a couple years ago but look at how that has performed since. As always, I appreciate your comment.

  2. Thank you, thank you, thank you! It’s so often missed how a novice investor should do research. I freely admit that I am very new to investing. I still have trouble figuring out when a stock is undervalued, or even which stock to invest in next. This is a very timely for me because I’m looking to add 5 more stocks to my portfolio.

    Clearly, the information in this post is not meant to be the be all and end all of research. But, it’s a great starting point, especially for those of us who are new to investing.

    Again, thank you.
    Dividend Portfolio recently posted…Credit Score Went DownMy Profile

  3. Divhut, Thank you for the post, especially for me being a novice. Do you ever use the P/E Ratio as a metric when considering a purchase? I just posted a quick question on my site asking folk to explain this metric as I like to have a better grasp as to how it relates to a company being good or bad.
    singledadmoney recently posted…Someone Help Me Understand P/E RatioMy Profile

    • Thanks for reading SingleDadMoney. I use P/E ratio to get a general idea but don’t put too much weight in it alone. One thing I do like to see how the P/E ratio looks compared to the historical average ( is a great free website for this!) Hope that helps!

  4. DivHut,

    As always, you provide another great point of information for me. I have a series of sites that I use while I look at potential buys but I’ve avoided Morningstar for awhile because when I first started investing I trusted their star system (like an idiot) and got burned. I think I may need to re-add them to my list of sites though. Thanks for sharing.
    Dividend Reaper recently posted…Investing in a Roth IRAMy Profile

    • Thanks for the comment! Morningstar is a big help for me. It’s not always super easy to use, but the breadth of their data (and how much of it is available free) is pretty impressive. Thanks again for your kind words!

  5. Dividends are great, especially in a rising market like we have had for years. If the reason for the investment is the yield than one can get a big surprise in down markets. I have found guaranteed yield is much more useful for this part of an investment strategy. I like to do this through cash and carry in commodity markets. Basically when there is a surplus of a physical commodity, which there is a lot of right now, the market will pay interest for individuals to hold physical commodities. Most of the time it is in the 2 to 3 percent range, but it’s not uncommon to find 5 to 7 at certain times of year. Your best bet if you are interested is to contact a commodity broker and discuss the options.

    • Hi CT,

      Thanks for sharing your take on dividend investing. I guess it all comes down to what a person is comfortable investing their cash in. No doubt commodities can provide a nice return too but it’s something that I would leave up to the experts as each market presents its own unique challenges and opportunities and vary greatly. Thank you for stopping by and commenting.


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