Methodology to Find Undervalue Dividend Growth Stocks

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).

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