(03-10-2014, 08:51 AM)hendi_alex Wrote: The one thing that jumps out at me is the fact that the Chowder Rule tends to weight dividend growth rate much higher than initial yield, in the decision making process. For a pure DG investor, that would likely make sense, especially were the investor has decades lefts before retirement. I agree with your caution, that many may tend to over use or misunderstand this very simple screening device when making investment decisions.
Not as applied by chowder it does not. I think it can be a useful guideline, one of several metrics to consider. There is so much variety in how dividend growth investors go about their work that I would hesitate to call much of anything a DGR gospel
Quote:High Current Yield is defined as a yield that is at least 50% above the yield offered by the S&P 500. Therefore, if the S&P 500 has a 2% yield, then 3% is the minimum number for purchase under the formula stated above.
High Growth of Yield is defined as companies that raise their dividend at a rate of 5% or more.
With the "Success Formula" in hand, I needed to come up with a way for it to support my long-term objectives.
My long-term objective is to grow the portfolio at an 8% compounded annual growth rate. I decided I would try to take advantage of total dividend return, current yield plus a 5 year CAGR to help support my long-term 8% CAGR objective. This total dividend return concept was dubbed The Chowder Rule by a Contributor on Seeking Alpha by the name of J.D. Welch.
More at the second link. Chowder has lowered his initial yield to 2.5%, but requires a higher 5 year dividend CAGR for those lower yielding stocks.
The Chowder rule number is the last point of consideration in the stock selection process. Companies that do not pass the earlier steps never get to the point of Chowder rule consideration
http://seekingalpha.com/instablog/728729...-selection
http://seekingalpha.com/instablog/728729...owder-rule