We are in the middle of the post-earnings season dividend rush—are you prepared? With the stock market paying higher yields than the bank, this is a great time to be an income investor.
Traditionally, I’ve been a big proponent of growth investing, so much so that I created my own stock screening tool—Portfolio Grader—to rate the growth potential of nearly 5,000 publicly-traded companies. If you’ve used Portfolio Grader, you know that it is designed to give you my analysis in easy-to-interpret A to F letter grades. And over the years, this letter grade system has been very successful in separating the wheat from the chaff.
Of course, Portfolio Grader has its limitations—most notably, it tends to under-represent dividend stocks. The fact is that many of the best dividend stocks on Wall Street aren’t the ones posting blowout sales and earnings growth each quarter. Instead, they’re growing at a slow, but steady, pace and putting much of their profits back into the pockets of shareholders. So, in order to accurately rate dividend stocks, I needed a new system.
Introducing Dividend Grader
To that end, this month, I launched Dividend Grader, a new stock grading tool. Now, I didn’t want to reinvent the wheel, so Dividend Grader follows a similar layout to Portfolio Grader. You can enter your tickers and get my buy, hold or sell recommendation in an instant with both tools. You’ll notice that the same ticker entered in Portfolio Grader and Dividend Grader may result in conflicting grades and buy recommendations, and that’s because this new tool focuses on four characteristics that are essential to identifying healthy dividend stocks.
The Dividend Grader Formula
The first is a strong Dividend Trend. What I look for in dividend stocks is their ability to increase their dividend payments. So, my Divided Trend grade looks at the last four quarters of payments to see if the payments are growing, unchanged or decreasing. It is generally a bad sign if a company has to cut its dividend payments.
The second is Dividend Reliability. This is looking at how consistently the company has paid a divided. Have they been paying for years without missing or have they had some gaps during times of trouble? Consistent payments is a great sign for the company and plays a big role in making buy, sell or hold decisions for a stock. The third grade is Forward Dividend Growth. There’s a lot that goes into this particular rating. It involves looking at growth estimates for the company and the divided. You certainly don’t want to own a company that isn’t on track to increase your dividend payments over time.
The fourth grade is Earnings Yield. This is one measure used to help gauge earnings quality. A higher positive number can possibly indicate future dividend increases or at least companies with the ability to pay dividends. A falling or negative earnings yield can indicate a possibility of lower future dividends or possibly a stopping of dividend payments.
All of this comes together to deliver you the Total Grade. This is where I blend the results of the four dividend grades and make the final buy, hold or sell recommendation. I also provide the Fundamental Grade and Quantitative Grade from Portfolio Grader for your reference.
Easy as A-B-C
While a vigorous amount of number-crunching goes on behind the scenes, Dividend Grader is designed to give you my analysis in easy-to-interpret A to F letter grades.
In Dividend Grader all of the individual grades are taken into account and create the final rating which gives you my current buy, sell or hold recommendation. A=Strong Buy, B=Buy, C=Hold, D=Sell and F=Strong Sell.
For more in-depth analysis on any stock, be sure to click on the Stock Report icon. When you do you’ll access Dividend Grader’s exclusive Stock Reports filled with timely stock news and commentary, live stock quotes, plus a detailed view of my analysis. You’ll also get a birds-eye view of past ratings for any stock, whether over the last few weeks or over the last 12 months.
Altogether Dividend Grader contains some 1,000 stock reports that are updated daily.
How to Get Started
Now it’s time to put the power of Dividend Grader to work for you. If you’re a new user, I recommend visiting the 3-step How to Get Started section first.
Happy stock hunting!