NEW YORK (Scott's Investments) -- In a recent post on Scott's Investments yesterday I referenced a recent article by Geoff Considine in which he discussed the merits of low volatility dividend growth stocks. To summarize his argument, the rational for seeking low-volatility dividend stocks is that "Volatility is considerably persistent through time, and the implied volatility from options prices is a key signal for determining the probability of corporate distress. The higher the implied volatility, the higher the probability of distress. Along the same lines, the lower the volatility of a stock, the more sustainable should be its dividend."

In his article, Considine focused on Dividend Aristocrats. Using StockScreen123, I decided to expand the available universe of stocks to screen for all non-OTC stocks trading above $3. In addition, I set the following requirements:

• minimum yield of 2%,

• a payout ratio less than 50%,

• a projected Price/Earnings ratio less than 17,

• a low standard deviation of the percentage moves of the closing prices over the past 100 days, and

• a one-, three- and five-year dividend growth rate of at least 5% each.

To be clear, these parameters are strictly my own. I added the low payout ratio and low projected P/E ratio in order to increase the chances that each stock's dividend can be sustained. A history of dividend growth was added to include stocks with a recent commitment to raising dividends. Stocks were then ranked based on their one-year sharpe ratio, or the annualized return of a stock divided by its annualized standard deviation of the weekly returns.


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    All of these metrics and ratios capture just one small piece of data and even when combined together may omit important factors when considering a stock for purchase. However, I think they give a good starting list for further research and I will continue to perform new screens on Scott's Investments for low volatility dividend growth stocks.

    Scott's Investments, focuses on consolidating and tracking free online investment resources for the public with an emphasis on ETFs, portfolio/trading strategies and macroeconomics. Follow Scott's Investments on Twitter.