What is a stock screener?

That's a great question.

I'll define it by saying what it does: A stock screener allows you to take all of the stocks out there, and throw away all of the ones that don't meet specific criteria.

Let's say I wanted to look only at companies that had a market capitalization of $500 million or more, with an annual dividend yield of 5% or more and a price-to-earnings ratio of 10 or less. I don't want to look at the financial statements for all of the companies out there, because it would take forever. Here's how I would use a stock screener to find that information.

1. I go to Google Finance and click on the "Stock screener" link on the left sidebar.
2. The default search is for all exchanges, and all sectors. I get 2,634 stocks reported.
3. First, I go to the Market Cap(italization) screen, and type "500M" in the left box. This sets the minimum market capitalization of the screen to $500 million. That brings the count down to 1,584.
4. Next, I'll set the minimum div(idend) yield to 5(%). Now I only have 181 stocks.
5. Finally, I'll set the maximum P/E ratio to 10. I only have 27 stocks to look at now.

The stock screener "screened out" the 99% of the stocks that didn't meet my criteria. Now, I can roll up my sleeves and dig into the companies that did meet my criteria. It's a huge time-saver.