Although my first two posts on income investing were likened to a dividend war, their purpose was more positive. To challenge the case for income investing, to better understand why people do it.

The comments have helped immensely, so let me recap. I remain true to the principle that beating the market means finding undervalued shares and income is not necessarily the best way to do it. Combining quality and income and avoiding companies that cut their dividends, though, may be a way of finding value and has certain behavioural advantages:

For people living off investment income, it’s more convenient to receive a dividend than sell off shares. Selling shares means making decisions about which shares to sell, which might be psychologically difficult for an investor who has spent her life building capital, or if market conditions make selling shares an unattractive prospect.

For people building an income, the dividend is a number to anchor on, when they might otherwise be swayed by the share price into buying high and selling low.

But as I investigate income stocks for an article that will be published in Money Observer magazine, I’m thinking about another advantage. It’s easy. The dividend is a fact, which ought to make deciding when to buy and when to sell less arbitrary. Selling, is a skill I still struggle with.

Just about everything we know about income investing suggests success depends on selecting stocks that are not going to cut their dividends. According to Aswath Damodaran, the highest yielding shares underperform non-dividend payers, presumably because really high yields cannot be sustained. Research from SG confirms they can’t.

Fortunately, one half of SG’s defence against cuts, the F_Score, is my favourite financial statistic. This is a reasonably trustworthy indicator that helps determine whether a company is getting stronger. If it is, it’s likely to be able to afford its dividend.

The other half of SG’s defence, the Distance to Default, is beyond me, and beyond Stockopedia, which I’ve used to rank (by dividend yield) shares with an F_Score of seven or more out of nine, the level used by SG, and compound annual per-share growth in dividends over the last five years of 3% (roughly inflation or better).

I’m looking for companies that have increased their dividend through the credit crunch, with relatively stable levels of debt and profitability and an eye on the forecast dividend if there is one. Factors like these, which are somewhat vague and look back over a number of years are difficult to screen but relatively easy to pick out from Stockopedia’s stock reports, which I’ve already likened to Moody’s famous manual, but probably owe more to Slater’s Really Essential Financial Statistics, only with more essential statistics.

This method of screening and ‘scanning’ rules out very high yielders, which are potentially distressed, but my selections must yield more than the market average of just under 3.5%. There are 57 companies with above average yields and F_Scores of seven, eight or nine, from which I have made a selection of 30.

It’s an arbitrary selection, I’ve forgiven declining profitability if it’s declined from a very high level to a merely high level. I’ve even forgiven a cut in the dividend, if it has subsequently returned to higher levels. I’ve been quite unforgiving when it comes to businesses facing external competitive challenges, Bloomsbury, the publisher, for example, and also big ugly businesses like GlaxoSmithKline, British American Tobacco and Royal Dutch Shell.

The top ranked share is Inmarsat, with a yield of 5.4%. Bottom ranked is Unilever, with a yield of 3.5%. It includes Thrifty 30 members Castings (3.7%), Ricardo (3.8%), and VP (4.2%). The smallest company is SpaceandPeople (market capitalisation ''12m, recently profiled by guest blogger Kerry Balenthiran) and the second largest is Sage (''3.4bn)*.

The median market capitalisation is ''550m, the average F_Score is eight, the average yield is 4.1%, and the companies in the list have compounded their per share dividends at an average 12.5% per year.

These are shares I’d expect to hold, the point is to collect the growing dividend, unless they show signs of distress; a cut, or an F_Score of less than five would worry me.

I’m tempted to make a lazy semi-mechanical portfolio out of the strategy, one I’d check on once every summer. It would fit nicely between the entirely mechanical Nifty Thrifty and the blood and guts Thrifty 30 in my roster of portfolios.

It might even complete the roster.

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* The full list will be published in Money Observer magazine and on www.iii.co.uk with the article later in the month.

** For an alternative method of finding quality income, see How to find the best high yield shares by UK Value Investor.