My main goal is to create viable, long lasting and safe streams of income that are not predicated on my ability to go to my day job on a daily basis. At the current time, my main focus is to screen a d build my dividend income using undervalued dividend growth stocks which provides a strong foundation.
Attempting to Find Undervalued Dividend Growth Stocks
My Dividend Investment Portfolio Screening Criteria
The Company has Paid Increasing Dividend for at least 20 Years
I use the Dividend Champion list as the starting point for my research, which unlike the dividend aristocrat index is not limited to those members of the S&P.
The Stock Price has to be Lower than 20 and Under the Industry Average
Price to Earnings ratio (P/E) is a valuation ratio that compares the company’s price to the state earnings. It is used as a way to compare companies regardless of their share price.
The Operating Margin Should be in line or Better than a Company’s Industry Peers
Operating margin is “a measurement of what proportion of a company’s revenue is left over after paying for variable costs of production such as wages, raw materials, etc. A healthy operating margin is required for a company to be able to pay for its fixed costs, such as interest on debt.” I want to invest in profitable companies.
The Price to Book Should be Below 4, or if it is not, then below Industry Average
Price to book (P/B) is a ratio that compares the stock price to its book value. A company’s book value is calculated from its balance sheet (assets minus liabilities).
The Dividend Yield is Above a Floating Target
Dividend Yield a “Financial ratio that 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. Dividend yield is calculated by dividing Annual Dividends per Share by Price Per Share” This moves every month I run a screen.
The Dividend Payout Ratio Should be Below 60%
The Payout Ratio is the amount of money paid out to shareholders in relation to cash flow. If a company is paying all their cash flow to shareholders
Applying my Dividend Watch List Screen
Every month I use the above dividend stock screen to purchase at least one or two lots (currently a lot is $500).