Author proposes new composite dividend metrics (EGR, DSS, PCM, DGC, DGT) to classify dividend stocks.
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I’ve been playing around with the Dividend Champions list and wanted to see if I could create some simple composite metrics with the raw data to better classify dividend stocks as slow, stable, or high-growth**,** instead of just filtering the raw data as is. I have different calculations that are then used in more calculations, so bear with me while I lay them all out. I had to come up with names for these, so if they sound stupid, let me know. I'd like to get honest opinions about these.
Equalized Growth Rate **(EGR)**: Takes the 1,3,5,and 10 year growth rates and gets the average. This should hopefully smooth out any jumps or drops in dividend growth. I personally look for an EGR of 10+.
Dividend Strength Score **(DSS)**: Multiplies the current yield by the EGR. The higher the number, the "better". Better is subjective here of course.
Payout Coverage Modifier **(PCM)**: 1 - Payout percent. A payout of 60% gives you 40% coverage. This tells you how much cushion for growth you have.
Dividend Growth Coverage **(DGC)**: essentially, this is the PCM/EGR. Negative numbers or results below 1 are bad. Anything above 1 is good, which means it's covered.
Dividend Growth Trend **(DGT)**: Takes the 1, 3, 5, and 10 year growth rates and adds/subtracts to get a score. The Math: (1yr - 3yr)+(3yr - 5yr)+(5yr-10yr). Below 1 implies deceleration of dividend growth, above 1 implies acceleration. BUT, this could be misleading by outliers (Super high or low years). I haven't tested this one thoroughly yet.
This should be combined with the standard calculations like the Tweed Factor and Chowder rule that you might use.
Would love to hear some thoughts on these. I would also love to see some of your own unique metrics that have been made. Always looking for ways to improve my search for solid dividend plays.