Fortunately, you don't have to reinvent the wheel. At your fingertips are some really great approaches. Here's one by "Dividend Growth Investor" as revealed in his analysis of 3M. These are some of the things he looks at:
- sector (important to ensure that diversification is kept at the forefront)
- is it a "dividend aristocrat" ? (member of the S&P 500 that has longevity and consistency in raising dividends
- major competitors (GE et. al.)
- annualized return over 10 years ( 8.6%...double investment in 8.4 years!)
- earnings per share growth rate for current year and 12 months ahead (graph of earnings per share)
- return on equity over 10 years (graph - shows return has consistently exceeded 27% over the decade)
- dividend payout over 10 years (graph )
- dividend payout ratio ( sustainability indicator)
As always I recommend limiting investments in single names (stocks and bonds combined) to 5% or less of investable assets.
Disclosure: This post is intended solely for educational purposes. Individuals should do their own research or consult professional advice before investing.