Covered Call Screener for Dividend Growth Stocks: How to Find and Filter the Best Candidates

Yes, You Can Screen for This Combination — Here Is How

Yes, several free and paid tools let you filter for dividend growth stocks and layer on covered-call criteria at the same time. The short answer: use a stock screener to isolate dividend growers, then cross-reference those results in an options screener to find strikes with enough premium to be worth selling. No single button does both jobs perfectly, but combining two tools takes about ten minutes once you know the workflow.

This article walks you through exactly that process — which filters to set, what numbers to look for, and one fully worked example on a name most covered-call traders already own or follow.

Why Dividend Growth Stocks Make Sense for Covered Calls

Dividend growth stocks share a few traits that pair well with covered-call writing. They tend to be large, liquid companies with actively traded options markets — tight bid-ask spreads, high open interest, and weekly or monthly expiration cycles. That liquidity matters because it keeps your transaction costs low and lets you roll positions without getting hurt on the spread.

They also tend to move more slowly than high-beta growth names. A stock like Coca-Cola (KO) or Microsoft (MSFT) is unlikely to gap up 30% overnight, which means the shares you own as collateral are less likely to get called away at a price that leaves you regretting the trade. The tradeoff — and this is real — is that slower-moving stocks generate lower implied volatility (IV), which means lower option premiums. You are giving up some income potential in exchange for stability and the dividend itself.

The goal for most dividend-growth covered-call writers is to collect both streams: the quarterly dividend and the monthly call premium. Done right, the combined yield can meaningfully exceed what the dividend alone would pay.

Which Screener Tools Actually Work for This Strategy?

You will need two tools working together.

**Step 1 — Screen for dividend growth stocks.** Free options include the NASDAQ stock screener, Finviz, and Barchart. Set these filters: dividend yield greater than 1.5%, five-year dividend growth rate greater than 5% per year, market cap above $10 billion (ensures liquid options), and payout ratio below 70% (leaves room for future increases). This will surface names like MSFT, KO, Johnson & Johnson (JNJ), Apple (AAPL), and similar Dividend Aristocrats or Dividend Achievers.

**Step 2 — Screen the options on those names.** Take your shortlist into an options-specific screener. Barchart's 'Covered Call Screener' tab, the CBOE's tools at cboe.com, or your broker's built-in options screener (TD Ameritrade's thinkorswim, Fidelity, and Schwab all have one) will let you filter by implied volatility rank (IVR), days to expiration (DTE), delta, and annualized return on the position.

**Key options filters to set:** IVR above 30 (you want IV elevated relative to its own history), DTE between 21 and 45 days (the sweet spot for theta decay according to the Options Industry Council), delta between 0.20 and 0.35 for the short call (out-of-the-money but not so far out that premium is negligible), and annualized premium yield above 8% on the position.

The CBOE publishes educational material on covered-call mechanics and return calculations that is worth bookmarking if you are new to this workflow.

Worked Example: Selling a Covered Call on MSFT

Let's run through a real-numbers example using Microsoft (MSFT), one of the most commonly cited dividend growth stocks for this strategy.

**Assumptions (illustrative, based on mid-2024 price levels):** - MSFT trading at $415 per share - You own 100 shares (cost basis: $380) - MSFT quarterly dividend: $0.75 per share ($3.00 annualized, roughly 0.7% yield at current price)

**The trade:** Sell 1 MSFT $430 call expiring in 35 days for a premium of $4.20 per share ($420 total for the contract).

**What the numbers look like:** - Premium collected: $420 - Delta on the $430 call: approximately 0.28 (out-of-the-money, 3.6% above current price) - Breakeven on the downside: $415 minus $4.20 = $410.80 - Maximum gain if called away at $430: ($430 - $415) + $4.20 = $19.20 per share, or $1,920 on 100 shares - Annualized premium yield on the position: ($4.20 / $415) × (365 / 35) ≈ 10.6% - Combined annualized yield (premium + dividend): roughly 11.3%

**What can go wrong:** If MSFT rallies past $430 before expiration, your shares get called away. You keep the $4.20 premium and the $15 of price appreciation to the strike, but you miss any gains above $430. If MSFT drops sharply — say to $390 — your $4.20 premium cushions the loss slightly, but you still hold a position down $25 from entry. The call premium does not protect you from a large decline. That is a risk you carry as the shareholder.

Also note: if the ex-dividend date falls before expiration, there is a small but real risk of early assignment. The Options Industry Council explains that American-style equity options can be exercised at any time, and call buyers sometimes exercise early to capture the dividend. Check the ex-dividend calendar before you sell.

Risks You Need to Understand Before You Screen for Anything

Covered calls are not a free lunch, and the screener will not tell you this.

**Capped upside.** Every covered call you sell puts a ceiling on your gains for that period. If you own MSFT and it jumps 15% in a month, you participate only up to your strike. This is the most common frustration new covered-call writers report.

**Dividend capture risk.** As noted above, early assignment around ex-dividend dates is a real possibility. FINRA and the OIC both flag this in their options education materials. If you are assigned early, you lose the dividend and the remaining time value on the option simultaneously.

**Volatility crush.** You may screen for a stock with high IVR today, sell the call, and then watch IV collapse — which is actually fine if you want to buy the call back early at a profit. But if IV spikes after you sell (say, on an earnings surprise), the call you sold is now worth more, and closing it early means a loss on the options leg.

**Tax treatment.** The IRS treats covered-call premiums as short-term capital gains in most cases, regardless of how long you have held the underlying stock. Importantly, selling a deep in-the-money call can suspend the holding period on your shares under IRS qualified covered call rules (Section 1092). Canadian investors should note that the CRA has its own rules on option premium treatment — consult a tax professional before trading in a non-registered account. Neither the IRS nor the CRA considers covered-call premiums to be qualified dividends.

**Liquidity risk on smaller names.** If you run the screener and it surfaces a dividend grower with thin options volume, the bid-ask spread alone can eat a significant portion of your premium. Stick to names with open interest above 500 contracts at your target strike.

How to Build a Repeatable Monthly Screening Routine

The traders who do this consistently treat it like a checklist, not a one-time search. Here is a simple monthly routine that takes under 30 minutes.

**Week before expiration Friday:** Review any open positions. Decide whether to let shares get called away, buy back the call and roll to the next month, or let the call expire worthless and start fresh.

**Day after expiration:** Run your dividend growth stock screen (Finviz or Barchart). Export the top 20 names by your criteria.

**Same day:** Pull up the options chain on each name in your broker or on the CBOE site. Filter for the 30-45 DTE expiration cycle. Look at the 0.25-0.30 delta strike. Note the premium, the annualized yield, and the next ex-dividend date.

**Rank by annualized premium yield** after excluding any name with an ex-dividend date inside your expiration window (to avoid early assignment risk) and any name where the bid-ask spread on the option is wider than $0.15.

**Execute on your top two or three names.** Diversifying across two or three positions reduces the impact of any single stock moving sharply against you.

This routine keeps you systematic and removes emotion from the process. You are not chasing the highest premium — you are finding the best premium relative to the risk profile of stocks you already want to own long-term.

Quick Reference: Filter Settings at a Glance

Use this as your starting checklist when you open any screener.

**Stock-side filters:** - Market cap: above $10 billion - Dividend yield: 1.5% to 5% - 5-year dividend growth rate: above 5% annually - Payout ratio: below 70% - Average daily volume: above 1 million shares

**Options-side filters:** - Days to expiration: 21 to 45 - Delta on short call: 0.20 to 0.35 - Implied volatility rank (IVR): above 30 - Open interest at target strike: above 500 contracts - Bid-ask spread: below $0.20 - Annualized premium yield: above 8%

These are starting points, not hard rules. Adjust the delta range if you want more premium (go higher delta) or more room to run (go lower delta). Adjust the DTE if your broker charges per-contract fees that make shorter cycles less efficient.

Is there a single screener that combines dividend growth filters and covered call filters in one place?

No single free tool does both perfectly, but Barchart comes closest — it has a covered call screener tab and separate stock screening filters you can run in sequence. Most traders use Finviz or a broker screener for the stock side, then move to the CBOE tools or their broker's options chain for the options side. The two-step process takes about ten minutes once you have your filter settings saved.

What delta should I target when selling covered calls on dividend growth stocks like KO or JNJ?

A delta between 0.20 and 0.30 is the most common range for dividend growth covered-call writers. That puts your strike roughly 3% to 6% out of the money on a typical large-cap stock, giving the shares room to appreciate while still collecting meaningful premium. Going lower than 0.20 delta usually produces premiums too small to justify the trade after commissions.

Can I get assigned early on a covered call and miss the dividend?

Yes, early assignment is a real risk with American-style equity options, which includes virtually all US-listed stock options. A call buyer may exercise early to capture an upcoming dividend, leaving you without the shares — and the dividend — before the ex-date. The Options Industry Council covers this risk in detail in its covered-call education materials, and the simplest fix is to avoid selling calls that expire after an ex-dividend date when the extrinsic value of the call is less than the dividend amount.

How does the IRS tax the premium I collect from selling covered calls?

The IRS generally treats covered-call premiums as short-term capital gains, reported in the tax year the position closes. Selling a deep in-the-money call can also suspend the long-term holding period on your underlying shares under the qualified covered call rules in IRS Section 1092, which could affect how your stock gains are taxed. This is a meaningful issue if you are trying to preserve long-term capital gains treatment on appreciated shares, so consult a tax professional before selling calls on positions with large embedded gains.

Are covered calls on dividend growth stocks worth it if the premiums are low?

It depends on your goal. Dividend growth stocks like KO and JNJ have lower implied volatility than high-beta names, so premiums are smaller in absolute terms. But when you add the annualized call premium (often 6% to 12% on a 30-delta strike) to the dividend yield, the combined return can be competitive with much riskier strategies. The key is running the annualized yield calculation before you trade, not just looking at the raw dollar premium.

What is implied volatility rank (IVR) and why does it matter for screening covered calls?

IVR measures where a stock's current implied volatility sits relative to its own range over the past 52 weeks, expressed as a number from 0 to 100. An IVR above 30 means options are priced higher than usual for that stock, which means you collect more premium for the same strike and expiration. Selling covered calls when IVR is low — say, below 20 — means you are accepting less compensation for the same capped-upside risk, which is generally a poor tradeoff.