I have setup a basic stock screener to help identify undervalued dividend growth stocks. I call this stock screener The Pollie-Code. In my experience it is very helpful to have a consistent code to apply to all stocks. Once a stock passes The Pollie-Code, I’m getting excited and start some further digging/analysis.
The Pollie-Code is as follows:
- CCC-list (dividend aristocrats)
- Dividend Yield > 2.5%
- Dividend payout <70%
- DGR 1 year > 0%
- P/E-ratio < 15
- EPS > 0
- ROE > 10%
- Market Cap. > 100M
- Chowder Rule > 12
- Stock price 52wk high-25%
No Tabaco and weapon industry.
Ofcourse I’ll always have the right to deviate from the code.
I’ll post The Pollie-Code for all new purchases.
How did you come up with the Pollie-code?
Thanks for your reaction patrick,
I wrote down all my purchases and what I learned after reading books.
It works for me.
Do you have a code? (Or stock screener?)
Nope, no specific code or stock screener I’m using just yet. So, does a stock need to meet all your measures or just some? Do you prioritize particular measures over others?
If a stock meets all the criteria i’m happy. But this is not always the case. So I assess every stock and make my decision. At least 8/10 most pass
My code is:
Morningstar-moat wide or narrow;
Morningstar-earnings uncertainty low or medium;
Dividendyield >3%;
Chowder > 9%.
Good luck with your journey from a fellow Dutch diviboy 🙂
Looks like a nice code!
I’ll be looking in to “your” morningstar moat.
A chowderrule >9, isn’t that a bit low?
Thanks for your kind words!
And good luck to you to!
Cheers,
Pollie
Which broker do you use in NL.?
I’ m using BinckBank but always one the lookout for beter brokers
And (forgot the most important)
Morningstar minimum 3 stars
Hi saltyrug,
Thanks for the input.
Cheers,
Pollie
Pollie,
I like your code, particularly the “ethics” (no tobacco or weapons). It seems like most investors will buy whatever hits their screening criteria regardless of industry.
Are you having trouble finding things to buy at a PE of < 15? Most of my wife and my holdings have PEs closer to 20. I didn't look at the other metrics, but here are some we own with a PE <15: AFL, CVX, IBM, KSS, NOV, SDRL, T, VZ, WFC. Aside from IBM, they are all financial, energy, retail, and telecom, sectors that typically have lower growth rates than others.
I also like the PEG ratio ( price to earnings to growth rate) to be below 2. A higher growth rate helps if you overpay for a stock. As an example (and this really doesn't meet your criteria), I bought Chipotle (CMG) stock a year ago since it is our youngest daughter's favorite restaurant. It has gone up from $483 to over $600 a share in that time, which is great, right? Looking at the PE of 56, I never would have bought it. But the PEG is currently at 2.2. You can do the math, but if the price stays the same for the next 4 years, and the company grows earnings at 25% per year as expected, the PE will be 22 in 2018 since the earnings will be almost 2.5 times what they are currently. Stocks with a PEG <2 in our portfolio: AAPL, ARCP, BP, CSCO, GE, GOOGL, IBM, MA, MAT, MMM, NKE, NOV, PNRA, SBUX, SDRL, TGT, V, WFC, WFM, and WMT. Some of these make great picks for the very long term because they have become huge brand names, have begun paying dividends, and should provide well above average returns. MA, NKE, SBUX, and V are examples, and a couple that we don't own are MDLZ and VFC.
Good luck!
KeithX
Thanks for your input. Your right about the ethics. For me thus feels right.
Stocks with PE<15 are hard to find thats for sure. But the do exist 😉 ofcourse sometimes a little bit higher PEG ratio is oke also.
I agree with your text about the PEG ratio. Is not alone the PE Ratio, also the growth rate is important.
What a great story about CMG! What a nice "profit"
You also keep up the good work
Cheers,
Pollie
I’m from the US, and just discovered your blog through twitter. What is “chowder” rate?
Hello Larry,
The chowder rule is named after “Seeking Alpha” member Chowder. This is a method of identifying candidates for purchase based on a combination of yield and (5-year) dividend growth rate. When the sum of these elements is above 12%, the company
presents an attractive entry point (8% for utilities). When the figure is above 8%, an existing holding is still considered worthy of being retained.
Look at Seeking Alpha and you will find more information.
And I’m using it in my Pollie-Code analysis
Cheers,
Pollie
Hi, I love your site. Shouldn’t #6 be ‘EPS > 0’ instead of ‘EPS > )’? I also invest in dividend stocks, as you can see by my site. My method is slightly different from yours, but I think we’re both looking for passive income. I’m moving more towards growth as well now, too. Thanks for the blogging, keep up the good work. Pat
Hi Pat,
Thanks for stopping by. Thanks for the heads up for my typing error. You’re right. I made it right straight away
I will visit your site soon and take a look around.
Cheers,
Pollie
I respect that you don’t invest in weapon or Tabaco industries. Even if they have appealing dividends.
Thanks!
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Wow, I’m definitely learning here. Thanks! As yet, I’m not using any screener other than my own common sense. But to be honset, after having passed a nett value of 30.000 I’m getting a bit nervous on the amount of exposure…
Great site!
If you have a dividend payout of <70% your EPS will be above 0 anyway isn't it?
I certainly need this kind of stock screener. I often find myself missed in numbers and metrics while having defined list of ratios will reduce rush about.
Thank you for giving a great practical and real life example!
I was thinking about buying some $AOS and $EMN but wasn’t sure if they are buy or not. remembered your screener and using it right now as a starting point.
Hi Jos,
Thanks for the compliment. And which stock did you bought based on my Pollie-Code?