Whether you believe that dividend investing is one of best forms of passive income or not, it’s certainly one of the most reliable ways to boost your ROI over the long haul and in a sideways market.

So not surprisingly, one of the questions I’ve been getting on a regular basis is:

How do you find the best, or highest paying, dividend stocks?

The simple answer is I use a stock screener.

Basically, a stock screener is a search engine for a wide array for quantifiable metrics for most of the stocks listed on the major stock exchanges. All you have to know are the type of analytical metrics you want to screen for, the quantity of those metrics, and analyze the companies the stock screener spits out.

Thus, a stock screener is not an ironclad method of picking the best stocks (e.g. highest dividend paying stocks), but a tool to narrow down thousands of choices to a select few. Once you’re down to less than 20, the real research can begin by reading income statements, 10Ks, conference call transcripts, etc. Only then, can you determine if the company has a sound future, can afford to pay their stated dividend, and possibly even increase their dividend in the future.

Best Stock Screener

Many top tier finance websites have a free stock screening tool available, but my personal favorite would have to be the free stock screener maintained by Zacks.com.

Of course, the results from a screening tool like this are only as reliable as the data itself, which is why I prefer Zacks over the others. One of my biggest pet peeves with finance sites, like Google Finance or Yahoo Finance, is that the data they have isn’t always 100% reliable or updated on a regular basis.

For example, if you’re a regular user of Google Finance, you’ll know that their dividend tracking is sketchy at best, and occasionally, a company’s dividend doesn’t show up at all. Similarly with Yahoo Finance, their site once had an individual listed as a C-level executive, even though that individual had been removed several years earlier. Not exactly the sort of reliability you’re looking for when you’re putting your money on the table.

So even though these sites are extremely useful and contain tons of valuable content, you shouldn’t treat their results as gospel. To be absolutely sure, you should double or triple check the data you’re searching for across multiple finance websites.

That said, the reason why I stick with Zacks’ stock screener over the others is that they make a few bucks selling their data and data mining tools, but they also use the same data in their own research and reports. Therefore, there is a reasonable degree of quality assurance built into the system.

If you’ve ever had a data mining job pouring over spreadsheets and databases (as I have), the best way to spot errors or glitches in the data is to work with it on a daily basis. Since they do this, I feel a bit more comfortable using Zacks’ website to pull data like book values, dividend yields, 5 year EPS estimates, etc.

Disclosure: this is not a paid review, nor am I being compensated in any way by Zacks.

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