Foundational Stock Screener
Hello fellow income seekers!
I am passionate about identifying companies with a proven track record of sharing their success with investors. That means digging deep into businesses that not only deliver consistent profit growth, but also reward shareholders with a rising stream of dividends.
But where do you even begin the search for such gems? Well, it all starts with a robust screening process. Today, I'm pulling back the curtain to reveal the foundational filters I use to pinpoint potential dividend paying companies that worth further analysis.
My Starting Point: The Quantitative Screen
Before I even glance at a balance sheet or delve into management's strategy, I narrow the field with some key quantitative metrics. These help me quickly identify companies that meet my baseline criteria:
Dividend Growth Streak: A minimum of 9 consecutive years of dividend increases. This demonstrates a commitment to returning value to shareholders, even during challenging times.
Payout Ratio: Ideally below 60%, but no higher than 70%. This ensures the company retains sufficient earnings to reinvest in future growth and navigate potential headwinds. Remember, a sustainable payout is crucial for long-term dividend health!
Dividend Yield: At least 2%. While yield isn't everything, it provides a solid starting point for generating income.
Price-to-Earnings Ratio (P/E): Under 20. This translates to an earnings yield of 5%.
Next, you can see the list of companies with market cap +$100bn that today December 12th, 2024 are meeting these screening conditions.
Why These Metrics Matter
This initial screening process is designed to highlight companies with a genuine commitment to rewarding shareholders. We're looking for those businesses that prioritise dividend distributions, while maintaining payout ratios at healthy levels. This can provide an indication of their ability to deliver further dividend increases in the years to come.
Of course, valuation is key. By targeting a P/E ratio below 20, we're essentially seeking an earnings yield that outperforms less risky assets. This ensures we're appropriately compensated for the inherent risks of equity investing.
Beyond the Numbers
Of course, quantitative screening is just the beginning. In my next post, I'll delve into the industry-specific factors I consider when assessing business risks. We'll explore how to evaluate companies in different sectors, ensuring they align with our investment goals.
Stay tuned for future articles on qualitative analysis, valuation techniques, and the tools I use to perform in-depth business reviews. We'll also be discussing how to weigh risk versus reward, a crucial aspect of successful dividend investing.
Until next time,
The Dividend Edge