10 best dividend stocks

Screening Filters

1. is_index_component: ['GSPC', 'RUT', 'DJI', 'NDX']

   • Purpose: Limit the search to stocks that are members of major U.S. indices:
     • S&P 500 (GSPC)
     • Russell 2000 (RUT)
     • Dow Jones Industrial Average (DJI)
     • Nasdaq 100 (NDX)
   • Rationale:
     • These indices collectively cover large-cap blue chips, mid/small caps, and major growth names in the U.S. market.
     • Dividend investors typically prefer established, liquid, well-followed companies rather than illiquid microcaps or obscure listings.
     • Using index membership as a filter improves quality and reliability of financial data, and focuses on companies that have passed basic size, liquidity, and listing standards.

2. free_cash_flow_ttm: { 'min': '0.0001' }

   • Purpose: Require positive trailing twelve-month free cash flow (FCF).
   • Rationale:
     • Dividends are paid in cash; sustainably paying and growing dividends usually requires generating cash above what the business needs.
     • Positive FCF helps avoid companies that borrow or issue shares just to fund their dividends, which is often a red flag for future cuts.
     • This supports the goal of finding “best” dividend stocks by filtering for firms that can actually afford their payouts.

3. dividend_5yr_cagr: { 'min': '3' }

   • Purpose: Include only stocks whose dividends have grown at least 3% annually on average over the last 5 years.
   • Rationale:
     • The user asked for “best dividend stocks,” which usually implies not only a good current yield but also growth and consistency.
     • A 5‑year dividend CAGR ≥ 3% shows a history of increasing dividends, outpacing low inflation and helping preserve purchasing power.
     • This helps filter out companies that pay dividends but haven’t grown them, which is less attractive for long-term dividend investors.

4. dividend_yield_ttm: { 'min': '3', 'max': '8' }

   • Purpose: Target stocks with a moderate to high but not extreme dividend yield, between 3% and 8%.
   • Rationale:
     • Minimum 3%: Captures stocks that provide a meaningfully higher income than cash or broad index funds, aligning with “dividend stock” expectations.
     • Maximum 8%: Very high yields (e.g., >10%) are often a sign of distress or that the market expects a dividend cut. Setting an upper limit reduces exposure to “yield traps.”
     • This range aims to balance income attractiveness with dividend sustainability, consistent with the idea of looking for the “best” rather than just the highest yields.

5. dividend_payout_ratio: { 'min': '30', 'max': '70' }

   • Purpose: Focus on companies paying out 30%–70% of earnings as dividends.
   • Rationale:
     • Below ~30% payout: The dividend may be very safe but also not a major capital return priority, potentially giving a low yield.
     • Above ~70% payout: Leaves limited room to reinvest in the business or absorb earnings declines, increasing the risk of dividend cuts.
     • The 30–70% band is a typical “sweet spot” for balanced capital allocation: enough payout to provide a solid yield, but enough retained earnings to fund growth and keep the dividend sustainable.

Why Results Match the User’s Request

• The screen is U.S.-focused and quality-biased by restricting to major U.S. indices, aligning with “best dividend stocks in the US stock market.”
• Positive free cash flow plus a reasonable payout ratio target companies that can sustain and grow their dividends, not just pay them temporarily.
• The 3–8% yield range ensures the selected stocks are genuinely income-oriented but avoids the riskiest high-yield names.
• The 5-year dividend growth requirement ensures that candidates are not just high yielders today, but have a track record of increasing dividends, a key hallmark of high-quality dividend stocks.

Together, these filters narrow the universe down to U.S.-listed, well-established companies with solid cash generation, attractive and sustainable yields, and a proven history of dividend growth—an appropriate interpretation of “10 best dividend stocks in the US stock market.”