Key Metrics for Dividend Stock Screening
This Dividend Stock Screener uses adjustable filters to identify companies based on metrics crucial for assessing the attractiveness and sustainability of dividend payments:
1. Dividend Output & Growth Metrics:
- Dividend Yield (% p.a.): Filters for companies providing a baseline level of income return based on the current stock price.
- DPS Growth (10yr % p.a.): Screens for companies that have consistently increased their dividend payments over time, a sign of commitment to shareholders and confidence in future earnings.
2. Dividend Safety & Sustainability Metrics:
- Payout Ratio (Div/FCF): A critical filter measuring the proportion of free cash flow used for dividends. Lower ratios indicate the dividend is well-covered by cash flow and has room to grow or be sustained during downturns.
- Interest Coverage Ratio: Screens for companies with strong ability to cover debt interest payments, indicating financial stability that supports dividend reliability.
3. Underlying Business Quality & Growth Metrics: (Supporting future dividends)
- ROIC (10yr % p.a.): Filters for companies efficiently generating profit from their operational investments, which ultimately funds dividends.
- EPS Growth (10yr % p.a.): Screens for companies growing their bottom-line earnings, providing the foundation for future dividend growth.
- FCF Growth (10yr % p.a.): Filters for growth in the actual cash flow available to the company, crucial for sustaining and increasing dividends.
4. Valuation Metric: (Finding dividend stocks at a reasonable price)
- PEG Ratio (10yr growth hist.): Balances the stock's P/E valuation with its historical earnings growth, offering a perspective on whether the dividend stock is reasonably priced relative to growth.
- Discount to Fair Value (FCF): Provides a valuation check based on historical cash flow growth, aiming to identify potential margin of safety.
Combining these filters helps find stocks offering not just yield, but also dividend growth potential backed by solid business fundamentals and financial health.