Begin by screening the stock market as a whole for stocks that pay a dividend. A free stock screener can be accessed at MSN Money, or if you have an online brokerage account, it's very likely you have one available for use there.
Input several variables that are important to you. For my own portfolio, I would choose: 1) a dividend yield greater than 5.0%; 2) a P/E ratio as low as possible; 3) a company with EPS growth estimates faster than industry competitors; 4) a debt to equity ratio lower than industry average.
Review the results, and beware of companies paying a dividend higher than 7%. Some stocks are Real Estate Investment Trusts (REITs), which are required to pay high dividends, or various natural resource trusts that pay similarly high dividend yields. However, a high dividend yield can be indicative a company has had a massive decline in share price, so further charting detective work should be done.
Review the stocks suggested. If you want diversification, pick several companies from a wide range of sectors. If you want sector specific stocks (energy companies or environmentally friendly timber companies), choose several companies that belong to the same industry.
Check the balance sheets and future earnings estimates of the companies that pass the screen. Future earnings can be hidden in infrastructure costs, stock buy back programs and a myriad of other factors, so do your research. Check the last year of press releases for major events, as well as look for any bad press from Wall Street.
Check the analyst recommendations for each stock you choose. One analyst's upgrade or downgrade can cause large fluctuations in stock price, so be sure to choose a stock that is in favor.
Check the company's history of dividend payments. Specifically, check if the dividend has risen over the last 5 to 10 years. Dividend increases are a great way of detecting a steadily growing company, and is a sign of the company's overall economic health.
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