Rating system for DGI stocks

[ken-do-nim]

Our esteemed administrator shared his rating strategy for DGI stocks here: http://dividendgrowthforum.com/showthread.php?tid=527.  However, that algorithm focuses on earnings & dividends, but since earnings don't guarantee growth, stocks like MO & T rose to the top.  So I've come up with my own system.  It can get much, much better, but it's a start.



Scoring is as follows: Ratio of today's price to 5 year's ago price + ratio of today's price to 2 year's ago price + ratio of today's price to 1 year ago's price + ratio of today's dividend to 5 year's ago dividend + ratio of today's dividend to 2 year's ago dividend + ratio of today's dividend to 1 year's ago dividend + the yield percentage.

What do you all think?  

It will take me some time to get this filled out with lots of interesting companies, but I wonder if any will unseat BroadCom!

[EricL]

FerdiS on Seeking Alpha has a very good rating system. He publishes regular updates on the CCC List there.

Here's a link to his article from earlier this month on the Dividend Contenders.

[fenders53]

Love your enthusiasm. You don't need to solve the riddle in a week. It's a worthy project. Growth in FCF is what gives a company the freedom to pay shareholders and the business. DGI isn't about this year so they have to be prepared for hard times. Need to address risk. Something as simple as credit rating or current PE vs historical.

Using your examples JNJ has amazing credit. AAPL is flush with cash. AAPL PE is ridiculous vs historical. IMO AVGO has the best prospects for growth with a reasonable PE. Aristocrats become aristocrats for a reason. They properly prepare for hard times and survive it for decades. It matters for a long term DGI hold and long term is what DGI is about.

[NilesMike]

I start with CCC list, all very good companies, check.

Go right to Tweed, Chowder and Graham numbers, good value, check.

From there I check payout ratios, PEG ratios, duddle around a bit. If it (they) fill a void in my portfolio, I buy them.

The entire process takes very little time. [I used to spend way more time, now that time is used devising futures strategies that work (for me), they are much more profitable but do require more time and a bit more nerve.]

If I want to get a little fancy, I check their historic dividend yield spreads and maybe sell off when overvalued and buy another undervalued. Example was JPM for MO recently.

I am not an accountant, I am not an insider, this system works for me.

[ken-do-nim]

I've also come up with an extremely simple heuristic to judge my own stocks: year-to-date gain percentage + annual yield percentage.

For example, the over 20% club:
SOXL
TECL
STX Seagate
CURE
HRZN - Horizon Tech
RIO - Rio Tinte (though my first purchase only; my averaged out year-to-date makes it just miss 20%)

Conversely, the under 6% club:
TSM - Taiwan Semiconductor
AVGO - Broadcom

Semi-conductor shortage; whatcha gonna do? It will eventually end.

[fenders53]

Your extremely simplistic system is a random thought. Critical analysis of your port year to date is extremely short range thinking. Any sort of DGI rating system is absolute folly if you are going to give up on a stock when the wind blows the wrong way for a couple months. The heroes you just listed aren't even DGI stocks.

I'll take a chance on hurting your feelings. It's for your own good because I actually care.

[ken-do-nim]

(04-29-2021, 06:51 PM)fenders53 Wrote: Your extremely simplistic system is a random thought.   Critical analysis of your port year to date is extremely short range thinking.  Any sort of DGI rating system is absolute folly if you are going to give up on a stock when the wind blows the wrong way for a couple months.  The heroes you just listed aren't even DGI stocks.

I'll take a chance on hurting your feelings.  It's for your own good because I actually care.

Oh no sweat it's not a rating system it's a performance metric, and most of the stocks have been owned just 1.5 months.  But it is entertaining to see progress this early.  That said, I left NEE and CSCO today because I wanted to bolster some of the others.  I think I'm done culling my list down to a manageable size now. I will probably get back into them later but I'd rather have ~40 @ $2500 than ~50 @ $2000.

[ken-do-nim]

In the article that Fenders just linked on WEC, the author outlines his point system for rating stocks:

1. S&P Credit Rating
2. Consecutive Years of Dividend Increases
3. Current Dividend Yield
4. Payout Ratio
5. Five-year Dividend Growth Rate
6. The Quant Score from Seeking Alpha.
7. Dividend Safety Score.
8. Long-term Debt to Total Capital.

It's pretty neat, though obviously needs some time per stock to calculate.

[fenders53]

(07-27-2021, 09:28 AM)ken-do-nim Wrote: In the article that Fenders just linked on WEC, the author outlines his point system for rating stocks:

1. S&P Credit Rating
2. Consecutive Years of Dividend Increases
3. Current Dividend Yield
4. Payout Ratio
5. Five-year Dividend Growth Rate
6. The Quant Score from Seeking Alpha.
7. Dividend Safety Score.
8. Long-term Debt to Total Capital.

It's pretty neat, though obviously needs some time per stock to calculate.

One of SA's advantages of a premium membership.  For free you can read authors pumping stocks and posting articles just for the fun of triggering grumpy old men.  It's quite effective lol.  That WEC article is outstanding.  I hope he does more UTEs.  That dividend growth chart plus their responsible efforts to grow are why I own them.  I am not sure if he tracks anymore UTEs but I am going to find out.  WEC quant score isn't off the charts compared to other sectors but it's a UTE with a protected income stream because they are mostly regulated.  I.E. they will never be debt free because that's not how the business model has ever worked.  They can leverage 2% financing and know they can get it back in customer rate hikes.