DFG Stock Screen v.2

Dividends grow like leaves on a tree.
Why Change
The last and only Dividend Family Guy stock screen was posted when I had started writing this blog.  A lot of it still holds true but like everything else it should be reviewed (annually for me) and adjusted.  Always learning and growing is a good way to become financially independent.  I have learned quite a bit in a year and some of that will be applied to version 2 of my stock screen.

First Change
My struggle continues on whether or not to include all companies listed in Dave Fish's U.S Dividend Champion's spreadsheet (All CCC worksheet).  Most of the companies with the most potential for growth tend to be Challengers (5-9 years of dividend growth).  These are also the most likely to cut dividends as it has not baked into the culture long enough.  I am not saying this doesn't happen to the kings (Diebold for example) but it is much rarer.

Building a solid core first, then once it is established take some more risk seems to be an approach much recommended by the broader dividend growth community.  A core in my taxable account is non-existent.  It is better in my IRA where most of my money went to Champions (25+ years) who had a 4% yield at the time I opened the account.  These purchases were before I was wiser.  Those high yielders do grow the dividend but the rate is mostly below inflation. 

There is a middle ground and that is the first change to my screen.  Challengers are out.  Now I will take a balanced approach to just those companies that have raised dividends for 10 or more years.  When I say balanced I am referring to a ranking system that takes value, growth, quality and yield factors into consideration and ranks companies on each.

Will this eliminate 10 baggers and other high growth companies?

Second Change
My next change to the DFG screen will be a cap on yield.  It will be at 6% max on entry unless it is a REIT or MLP.  I have yet to determine what the best range is for those.  Any input from you is always welcome.  This change will help reduce risk of purchasing a company who may cut the dividend in the near future.

The Screen Simplified
Dividend Champions and Contenders
Rank each company on value, growth, quality and yield
Rank each company with overall ranking
From overall ranking filter on dividend yield over 3%

Once that list is formed I usually research the top 10 who are less than 6% yield excluding REITs and MLPs.  Then another top 10 for just REITs and MLPs.

At this point I am leaving it at 3%.  If there are not enough opportunities at that level I will mostly likely drop the yield down to 2.5% but require a double digit dividend growth rate for the past 5 years with no downtrend.  What do you think?  Is that better than starting at 3%?

To make it easy for me to find the DFG Screen I created a new page on my blog.  That is it for now and there will be changes.  Always are.  The key is to hold even as your entry criteria changes over the years. 

Happy reading,

Image By Domdeem and courtesy of www.FreeDigitalPhotos.net


  1. I think that stratey is a good idea. If you're gonna drop the initial yield, it has to be made up for somewhere else i.e. in requiring a higher CAGR or whatever. Here in the UK, we have currently got slightly higher dividend yields on average, so I don't tend to have to look for higher growth rates.


    1. Yeah I need to take a closer look at Dividend Life's list he has been working on. UK stocks might not be bad and are more tax efficient than other contries.

  2. It's always good to have a strategy. Takes the emotional side of investing out of it and you will know exactly why you bought a particular stock in the the future/past. I personally do not have a strategy to follow but I should get one.

    I'm glad you wrote this post so I can look deeper into why I buy the things I do.

    1. I didn't have a strategy either for some time. Led to many initial bad purchases on my part. Mostly they were chasing yield. Hopefully you learn from all of these blogs ( I sure did.)

  3. These are changes for good to me! Strategy is the key. However, there's always a part where I need to analyze facts myself and make decisions on them rather than on numbers only.

    1. Agreed. I use the screen to narrow down the list. With my limited time I research as best I can and make buys based on my comfort level. Good luck with your purchases this year.

  4. DFG,

    These are some good changes in my book as they're geared to reducing your risk and smoothening dividend income over time. Dropping high yield stocks is a good strategy as that often signifies an unstustainable dividend payout.

    Looking forward to which stocks you'll be buying next.


    1. Yeah it only takes getting burned once to ever want to chase high yields again. Thanks for the note.

    2. PS I like the filters and auto update you have in the Google spreadsheet. Very nice.

  5. Hi DFG,

    I like the changes. For the purposes of screening against the CCC list, you might want to put the yield a little lower than 3% since the yield column gets more and more out of date as the month progresses. So if a stock starts out high in a month with a low yield in the list, and then drops in price you might miss it.

    I also use a 6% upper limit to stop myself from chasing yield or a 'too good to be true' stock although I'm willing to buy at the low end of 2.25% or higher. The overall S&P dividend average is currently around 1.9% right now so I set the low end to be a little higher than that.

    I think your question about a 3% vs. 2.5% starting point largely depends on how many stocks survive the screening. The average yield for a 25-year Champion is 2.58% and a 3% screen will eliminate more than 60% of them. The Contender average is 2.75% and Challenger average is 3.15%, so the higher your minimum yield, the more you'll tilt towards shorter duration stocks.

    Best wishes,

    1. Thanks for the feedback DL. I still worry that dropping the challengers will limit my growth potential. Like you said the lower the duration the higher the average yield (and risk). But you never know. Some of them may be the companies that pay dividends for the next 25 years.


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This webpage is provided for general information only and nothing contained in the material constitutes a recommendation for the purchase or sale of any security. If you have any questions please feel free to contact me at dividendfamilyguy at gmail dot com.