Have you had a chance to try Dividend Grader yet? Last month, I introduced this brand-new stock screening tool, and my team and I have received plenty of excellent feedback on the usefulness of this tool. If you want to boost your portfolio’s income potential, I highly recommend you give it a spin; getting started is as easy as 1-2-3!
For those of you who have used Dividend Grader, you may have noticed that this system’s ratings vary from Portfolio Grader—my original stock screening tool. I’ve received a bunch of questions on why this is, so today let’s open my mailbox:
Why does Dividend Grader generate different ratings than Portfolio Grader? For example, AFSI is an F in Dividend Grader and an A in Portfolio Grader.
In a nutshell, Dividend Grader measures the attractiveness of a stock as an income (dividend) investment, while PortfolioGrader measures the growth potential of a stock.
Let’s illustrate this with AFSI. When you plug AFSI in Dividend Grader, you’ll note that the stock currently earns Fs for Dividend Trend, Dividend Reliability, Forward Dividend Growth and Earnings Yield, so it earns an F-rating overall in Dividend Grader. The fact is that Amtrust Financial Services’ dividend yield is below the industry average, and its forecasted earnings are lackluster (which means that AFSI could struggle to pay a consistent dividend going forward). So, as an income investment, you can do better. You can read more about my Dividend Grader formula here.
As far as Portfolio Grader is concerned, AFSI has a great sales and earnings track record (having beaten analysts’ estimates the past several quarters running). The company also has one of the best return on equity ratios in the industry, and it has a healthy cash flow situation. Taking this all into consideration (even accounting for slower forecasted sales and earnings growth), AFSI earns an A as a growth stock. As a refresher, you can brush up on the Portfolio Grader formula here.
Why does Dividend Grader include Portfolio Grader’s Quantitative and Fundamental Grades, but Portfolio Grader doesn’t include any of the dividend sub-grades?
Why do I include the Portfolio Grader Quantitative and Fundamental Grades in Dividend Grader, but not vice versa? Well, it’s because the Portfolio Grader total grades and sub-grades are central to my investing strategy. While dividend stocks certainly have their place in any well-balanced portfolio, I am first (and foremost) a growth investor. So in Dividend Grader I provided these grades for your reference. However, please know that they are separate from the Total Dividend Grade—the Total Dividend Grade is comprised of the four dividend metrics that I mentioned above. And, the reason that I didn’t include these four dividend grades in Portfolio Grader is that not every stock pays a dividend.
In deciding whether to buy, sell or hold a stock, which screening service should I go with—Dividend Grader or Portfolio Grader?
In figuring out which grade to go with, you should determine whether you’re adding the stock as a growth stock (on the strength of its capital appreciation potential), or a dividend stock (on the strength of projected future cash flows).
Does an A-rating in Dividend Grader mean that you personally recommend it?
Not necessarily. My handpicked recommendations are featured in my newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Platinum Growth Club and the Family Trust. If you’re interested in seeing my short list of top stocks, you can try them out risk free by clicking here. Dividend Grader (and Portfolio Grader) are designed to supplement any investing strategy by providing you with the data to make informed investing decisions.
I hope this information was helpful in navigating Dividend Grader; I’ll be in touch again with tomorrow’s blog.