A blue-chip focused screen focused on buying blue-chip stocks whose dividend yields are near the high of their historical ranges and selling when the dividend yield declines to historic lows. Geraldine Weiss was the founding editor of Investment Quality Trends - one of the longest-lived investment newsletters. According to a 2002 Forbes article, she has seven criteria in total (but the last criteria comprises a further six "blue-chips only" conditions). A stock:
1. Must be undervalued as measured by its dividend yield on a historical basis.
2. Must be a growth stock that has raised dividends at a compound annual rate of at least 10% over the past 12 years.
3. Is selling for two times book value or less.
4. Has a P/E ratio of 20-to-1 or below.
5. Has a dividend payout ratio in the 50% area (or less) to ensure dividend safety with room for growth.
6. Debt is 50% or less of total capitalization.
7. Meets all six of our Blue Chip Criteria: dividend raised five times in the last 12 years, carries an A rating from S&P, has at least 5 million shares outstanding, at least 80 institutional investors hold the stock, 25 uninterrupted years of dividends and earnings improvements in seven of the last 12 years.
While it’s difficult to replicate this screen exactly for the UK market, we’ve produced a Geraldine Weiss-lite version along similar lines. more »
The number of consecutive years the company has paid a dividend over the last 10 years (i.e. the maximum is 10).
Stockopedia explains Div Streak...
Consistent dividend payments indicate a company with a certain level of financial stability. It's important to check the individual payments to see if the dividend has ever been cut, but the dividend streak can be a useful preliminary filter.
The dividend yield shows how much a company pays out in dividends each year relative to its share price. In the absence of any capital gains, the dividend yield is the return on investment for a stock. It is calculated as the historic or consensus forecast Annual Dividend per Share, divided by the current Price, multiplied by 100, and is stated on a net, rather than gross, basis.
Stockopedia explains Yield %...
In the absence of any capital gains, the dividend yield is the return on investment for a stock. A higher dividend yield is often considered to be desirable among many investors but it needs to be interpreted in light of the rest of the company's financials.
A high dividend yield may be considered to be evidence that a stock is under priced or alternatively it may be that the company has fallen on hard times and future dividends are at risk of being cut. Similarly a low dividend yield can be considered evidence that the stock is overpriced or an indication that future dividends may be higher. Many growth companies do not pay dividends, preferring to reinvest profits back into the business.
The total number of Shares that have been authorized/issued by the company, and purchased by investors. They have voting rights and represent ownership in the corporation by the person or institution that holds the shares. They should be distinguished from treasury stock, which is held by the company.
Stockopedia explains Shares Out...
Shares outstanding can be calculated as either basic or fully diluted. The fully diluted shares outstanding count includes diluting securities as options, warrants or convertibles.
The payout ratio measures the amount of earnings paid out in dividends to shareholders. It is calculated as DPS / EPS. Investors can use the payout ratio to determine what companies are doing with their earnings. Investors seeking high current income and limited capital growth prefer companies with high Dividend payout ratio. However investors seeking capital growth may prefer lower payout ratio if capital gains are taxed at a lower rate. High growth firms in early life generally have low or zero payout ratios. As they mature, they tend to return more of the earnings back to investors. The inverse of the payout ratio is Dividend Cover, which is a more popular metric in the UK.
This is the ratio of Total Current Assets divided by Total Current Liabilities for the same period. NOTE: This item is Not Available (NA) for Banks, Insurance companies and other companies that do not distinguish between current and long term assets and liabilities.