Today, we’re going to revisit a subject that we have been asked about many times now over on our Instagram page: @FindependenceCanada
The question that we have probably received more than any other is “how do you find these stocks that you invest in?” so we’re going to take a dive into just that today.
As a disclaimer, this is a method to discover the stocks or to narrow down what you’re searching for but to actually pick the exact stock or stocks you wish to buy there should be some further research on your part or consultation with an investing professional.
Step 1:
Go to www.tmxmoney.com
We like to use tmxmoney because of its ease of use, and the familiarity we have with the site at this point in time. There are other sites with similar features but for today this is what we’re going to use.
Step 2:
At the top of the page go under investor tools and look for their “stock screener” option.
Step 3:
Apply your screeners, here are some screeners that I use initially.
Feel free to sort by exchange, sector, market cap, dividend yield. Whichever criteria you have for your portfolio simply insert the values here.
Step 4:
You’ll now see your initial list of screened companies, if the number of companies is too large or too small for your liking simply go back and change your filters. At the top right you’ll see “edit columns” this is a nice feature as you’ll see.
After clicking edit columns you’re prompted with this:
These are usually the stats that I want to know when comparing the companies I’ve now filtered for. Sometimes I make some changes to view things like 5 year avg. yield but for the most part these do the trick.
You will now have the ability to sort by any of the columns you wish. As a habit I usually sort by yield initially and then work backwards from there as we don’t want to find ourselves just chasing the highest yields. Being able to see the yield and payout ratio side by side is a nice feature as with a little practice you’ll know right away which companies you’d like to do more analysis on.
Step 5:
Find your favourite stocks and dig deeper into them. For this step I look for a yield above 3%, a payout ratio lower than 100% (ideally as low as possible), a market cap in the higher end of what the TSX or whichever exchange you’re using has and a P/E ratio that is as low as possible.
It’s important to note that not all industries can be compared apples to apples, for instance utilities will typically have higher yields as a rule but they will also carry more debt and have a higher payout ratio, also they potentially have less room to grow their dividends year over year.
On the flip side of that, financials can usually be found to have lower starting yields but also lower payout ratios, meaning they have more coverage and potentially a “safer” dividend.
Again, these are generalizations and will vary company to company and industry to industry so use these tools to find your targets but please do your own due diligence from that point forward.
We hope that these tips have pointed you in the right direction and allowed you to gain a little confidence in your investing.
If you have any questions or comments leave them here or over on our Instagram: @FindependenceCanada and we’ll be sure to get back to you.
Thanks for reading,
FIC.