Introduction

This article will guide you through the process of selecting a group of dividend-paying stocks that have strong potential for growth. We will be using Stock Rover, a platform designed to help investors find and manage their investments effectively.

The first step in our selection process is to create a watchlist of 14 stocks from various sectors. These stocks are chosen based on their performance indicators such as P/E ratio, beta, dividend yield, and dividend growth rate.

Step 1: Create a Watchlist

To begin with, we need to create a watchlist of potential dividend-paying stocks. We will be using Stock Rover’s built-in tools to filter and sort through thousands of stocks based on specific criteria. The following is the list of criteria used:

• P/E ratio less than or equal to 25
• Beta greater than or equal to 1
• Dividend yield greater than or equal to 2%
• Dividend growth rate greater than or equal to 10%

Using these criteria, we have identified 14 stocks from various sectors that meet our requirements.

Step 2: Select the Final Set

The next step is to select a final set of stocks from our watchlist. We will be choosing a mix of sectors and dividend-paying stocks with strong growth potential. Based on our analysis, we have selected the following eight stocks for our portfolio:

1. Valspar (Valspar) – This company has a lower P/E ratio and provides diversification from its sector.
2. Disney (Disney) – With strong dividend growth, this stock is an attractive choice for our portfolio.
3. Starbucks (Starbucks) – Similar to Disney, Starbucks offers a strong dividend growth rate and low beta.
4. Kroger (Kroger) – As the only consumer defensive in our list, Kroger’s price performance has been very strong despite its debt concerns.
5. UNH (UNH) – This healthcare stock offers strong dividend growth and is cheaper than its peers.
6. Union Pacific (Union Pacific) – With strong growth and low P/E ratio, this industrial stock is an attractive choice for our portfolio.
7. Canadian National Railway (Canadian National Railway) – Similar to Union Pacific, this rail transportation company has a reasonable P/E ratio and strong EPS growth.
8. Toro (Toro) – This tools and accessories company offers consistent sales, operating income, and EPS growth.

Step 3: Analyze Correlation Matrix

Before finalizing our portfolio, we need to analyze the correlation matrix of these eight stocks. The correlation matrix shows the relationships between each stock’s price movements over a specified time period (in this case, one year). This analysis helps us identify any correlations or similarities in their performance.

Upon reviewing the correlation matrix, we notice that most of the stocks have moderate to high correlations with each other. However, there are some exceptions such as Valspar and Disney, which show lower correlations with the rest of the group.

Step 4: Create a Portfolio

The final step is to create our portfolio using the selected stocks. We will be allocating an equal amount of money (12,500) to each stock in our portfolio. This will ensure that we have a balanced mix of sectors and dividend-paying stocks with strong growth potential.

Our fantasy portfolio, "Fantasy Dividend Growers," has been created with the eight selected stocks. We can track its performance over time and make adjustments as needed to optimize returns.

Conclusion

In conclusion, selecting the right group of dividend-paying stocks requires careful analysis and consideration of various factors such as P/E ratio, beta, dividend yield, and dividend growth rate. By using Stock Rover’s tools and filters, we have identified 14 potential stocks from various sectors that meet our requirements. After analyzing their performance indicators, we selected a final set of eight stocks for our portfolio.

The correlation matrix analysis revealed moderate to high correlations among the stocks, but also some exceptions. Finally, we created our fantasy portfolio using an equal allocation method to ensure a balanced mix of sectors and dividend-paying stocks with strong growth potential.

We will continue to monitor our portfolio’s performance and make adjustments as needed to optimize returns.