05-04-2014, 11:45 AM
So here is a sample of the data I keep for each of the companies on my watch list -- MCD in this case.
The top half is pretty self-explanatory; I just compile earnings and dividend numbers by quarter. Numbers in green are already announced (or most likely given history); numbers in red are guesses.
In the bottom half, the single-cell boxes that have borders around them (there are 8 of them) I fill in manually. The rest of the numbers are calculated automatically from the other data.
In the big "scoring box" (cells J15 to M26), you can see how I assign points. There are 100 possible points. Dividend streak is worth 20 points; current yield is worth 20 points; payout ratio is worth 15 points; dividend growth and earnings growth are each worth 10 points. The business model category is subjective, but the basic idea is that KO has a way better / easier to understand / easier to execute / less overhead / less risks business model than, say, a tech firm or a financial firm. Basically, if I could imagine running the place myself, it gets a lot of points in this category; if I couldn't, it gets fewer.
Finally, there is an adjustment opportunity, that I use to tweak the outcome in certain situations. The best example I can think of is MO. The formula that assigns points for payout ratio is geared in such a way that points diminish pretty rapidly above a payout ratio of 60 percent. By 80 percent, the formula assigns almost no points. But MO specifically targets a payout ratio of 80 percent, so I don't feel that it is a fair assessment to give it no points in that category. So I use the adjustment box to make that "right."
I'll follow up with another post soon about the formulas for assigning points in each category, if I can get up the nerve. It is pretty arbitrary. But I like the idea of throwing it open to the group. With the group's feedback, maybe I can make it a whole lot better.