Our Two Favorite Dividend Stocks

We spend a lot of time on growth stocks while ignoring the other half of equity investors, dividend seekers. So, today we decided to break out the trusty stock screener to find high quality income-producing stocks with room for growth in price and payout: total return gems.

Obviously, the first thing we have to identify companies that are currently paying a dividend – 3,079 publicly traded companies return value to shareholders via cash payments, but that's way too many for most retail investors.

What's an attractive yield? Almost anything can beat the bank, right? Three percent is a nice round number. Let's see how many of the 3,079 are at least 3% generous. Wow, more than we expected at 1,199, but a good jumping-off point none the less.

[Related -Hasbro, Inc (HAS): Things You Should Know Before Investing In Hasbro]

As we mentioned, companies that offer some price appreciation are more attractive in our view. So, our interest is focused on those with projected sales and earnings growth. At least 5% for increases for the top and bottom line is the minimum we'd accept. And the screener says…

Now we are getting places; to our surprise, again, that shaves off a lot more than expected, just 226 make the list.

Ahh, but we don't want companies that are issuing debt and using the proceeds to payout dividends. It's better, in our opinion, that the money comes from profits. Of course, some additional debt is OK. We'll be looking at just those with a year-over-year long-term debt increase of less than 10%. Alright, that puts the number of candidates under 100.

[Related -Hasbro, Inc. (HAS): On The Cusp Of A New Chapter]

Since everybody like a raise, how about limiting the output to those who've upped their dividend by an average of at least 10% annually during the last three-to-five years? That did a excellent job of paring the list. Now we are at just 28 possibilities.

Let's move back to fundamentals. Warren Buffet likes companies with a Return-on-Equity of 14%. If it works for Warren… down to eight, but still a few more than we'd like.

Two of them are coal stocks. Considering President Obama's dislike for coal, we'll toss them out, too much political risk. Three are international ADRs, there's nothing wrong with non-US stocks, but we are homers. And, one isn't profitable at the moment. 

That leaves two, and the winners are:

Hasbro, Inc.(NASDAQ:HAS) - 3.3% dividend yield Public Storage (NYSE:PSA) - 3.2% dividend yield Both companies are excellent candidates to lift their dividends while shares could see upside too, making the pair attractive total return ideas.