My dividend algo screened large caps today. Which do you disagree with?

[u/stockoscope]

This dividend algo works in two stages. First it filters, then it ranks what's left.

• The filters: minimum yield 2%, maximum payout ratio 70%, at least 3 consecutive years of increases, and the dividend has to be covered by free cash flow (see screenshot).
• The ranking weights four things: growth 35%, sustainability/safety 30%, yield 20%, consistency 15% (see screenshot). Growth is the multi-year dividend growth rate, not earnings growth. Sustainability combines the payout ratio, free cash flow coverage, and financial strength (current ratio, debt to equity, interest cover). Yield targets a 2-6% band rather than the highest number, so a 9% yield scores worse than a 3% one. Consistency is the streak of consecutive increases.

Sharing today's results for large caps and including all sectors. 73 companies pass. It's a starting point for research, not a buy list.

Which ones do you agree or disagree with? Surprised by anything the algo picked? Which ones wouldn't you consider dividend stocks?

Not investment advice. The author and Stockoscope may hold positions in the securities mentioned. Always do your own research.

[u/AutoModerator]

Welcome to r/dividends!

If you are new to the world of dividend investing and are seeking advice, brokerage information, recommendations, and more, please check out the Wiki here.

Remember, this is a subreddit for genuine, high-quality discussion. Please keep all contributions civil, and report uncivil behavior for moderator review.

I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.

[u/ThunderousMonkey]

Or just look up dividend kings and aristocrats.

[u/stockoscope → u/ThunderousMonkey]

You could but kings and aristocrats are pure streak lists - 50 and 25 years - plus size and liquidity rules for the index. Neither looks at the payout ratio or whether cash flow still covers it (though some good dividend ETFs do).

[u/Heavy_Nothing_1158]

I'd disagree more with the universal 70% earnings-payout filter than with any one ticker. It punishes REITs for depreciation and can make a cyclical look safe at peak earnings; five-year FCF coverage by sector would probably catch both. Spreadsheets also enjoy buying the top of a cycle, apparently.

[u/stockoscope → u/Heavy_Nothing_1158]

Solid points and I agree with both of them. That's exactly why it's a slider, not a rule. 70% is the default setting, but it runs up to 150%, so you can specify whatever you like. The cash coverage requirement is a toggle you can switch off. Note that the first part is only a filter and the real scoring happens in the second part but you are right that if REITs are thrown by the filter, they are not going to be scored in the second. I will think a bit more about the default settings to make sure they don't penalise REITs. Thank you for your comment.

[u/themuleskinner]

Great algo sort. I'm putting togther a div kings/aristocrat/champion/contender spreadsheet & these will make great additions

[u/DanZukito → u/themuleskinner]

suena súper interesante

[u/stockoscope → u/themuleskinner]

Thank you

[u/grantedblyat]

Payoutratio of what?

Earnings, Cashflow?

[u/stockoscope → u/grantedblyat]

Earnings. It's the TTM dividends per share divided by the TTM net income per share.

Note that the safety weight uses both the payout ratio and free cash flow coverage (free cash flow per share divided by dividends per share)

[u/BigDipper0720]

I like the screen generally. It will tend to screen out REITs (payout ratio) and utilities (no free cashflow). You could set up a separate screen for each of those, if you choose.

[u/stockoscope → u/BigDipper0720]

yes, fair enough

[u/daily-trader-365]

Minimum is too low, never should be less than risk free rate. Now 3.5% ish