How To Use The Screeners

Dividend Earner

Dividend Earner

Updated on

7 min read Affiliate Disclosure

Stock screeners are amazing. There is a reason why many newsletter services evolve to provide screeners. It’s to compare stocks next to each other, sort and filter on various metrics.

Seasoned DIY investors will need access to a screener to save time and you know it. The other benefit of a screener is that some unfamiliar stock can all of a sudden surface and be of interest.

The Basics Of A Screener

In simple term, a screener is a big table, often a spreadsheet, listing securities with the ability to filter the table across various metrics (those are the columns).

The Power Of A Screener

While the basics are pretty standard features with spreadsheets, the combination of filters by selecting parameters makes it a very powerful way to short list stocks from a large list.

What becomes critical are the type of metrics you have access to and how useful they are to you.

Unique Dividend Snapshot Metrics

What makes the Dividend Snapshot Screeners different from all the other screeners? Simply put, it’s the unique data points provided in a simple and easy to understand manner.

  • The Grade and Score is proprietary. One piece of information I will share is that it is usually relative to peers.
  • The Chowder Score has a twist from original formula. Why did I modify it? Extreme patterns would scew the metrics due to abnormal years for some companies. I smoothed it out basically.
  • The Market Cap Group is not unique but it simplifies understanding if I am dealing with a riskier investment when the market cap is really low.
  • The Historical Yield Strength is a powerful metric that can tell if a blue-chip stock is undervalued or not. It compares the current yield to the 5-year historical yield.
  • The Dividend Growth Streak is cap at 10 years. I purposely do that to avoid focusing on stocks with 25 years or 50 years as it means nothing. How the stock did during the past market correction is what matters.
  • The Dividend Growth Stock Fit is attempting to score the stocks that are consistent dividend growth stocks.
  • The Dividend Income Stock Fit is attempting to score the stocks that are consistent dividend income stocks.

Zero Human Inputs

There is absolutely zero human inputs with the screeners. It’s all data-driven through formula and comparison.

The screeners basically can provide you with quantitative view of the company but you still need to do your due diligence on the qualitative.

What Metrics Matter To You?

Over the last 12 years, what I know is that no DIY investor is super clear on their approach until they are at it for a few years. Even then, it can change.

Why is that? Many settle on a dividend investing approach during the accumulation years as an easy to follow investing strategy but the reality is that you generate more money during the accumulation years with a dividend growth investing strategy than a dividend income strategy.

That was my path.

Nevertheless, due to both strategies being important and critical for both the accumulation years and the retirement years, I have focused on providing an angle on both dividend growth and dividend income.

Where are you in your investing journey?

  • Beginning to save and invest -> Start with a broad index ETF (a screener is coming)
  • Still working and growing my portfolio -> Time to supercharge your total return with dividend growth stocks.
  • Approaching retirement -> Time to focus on tax efficiency and shift some accounts to dividend income.
  • In retirement -> Be very tax efficient, beat inflation, and get regular income from your portfolio.

Dividend Growth Metrics

The shortcut is to filter on Dividend Growth Stock Fit with a score of 7, 8, 9, or 10.

  • Focus on all market caps but be careful about nano-cap and micro-cap as those are really small and you could end up on a rollercoaster rire.
  • Ignore the yield … What? Really? Yes, 1% is fine here. As long as it pays a dividend.
  • Focus on 10% dividend growth over 5 and 10-year.

The above should get you started to narrow down the list.

Dividend Income Metrics

The shortcut is to filter on Dividend Income Stock Fit with a score of 7, 8, 9, or 10.

  • For stability of business, I tend to focus on mid-cap or larger here.
  • Dividend growth is still important but only to keep up with inflation. Either all your holdings each keep up with inflation, or your overall portfolio, or by account.
  • Last but not least, the Yield! Let’s be real here. We all want the highest, but the highest can be a mirage. Compare to the sector and industry to know it’s not out of the norm.
  • I still like a lower yield than the 5-year historical yield if possible.

Depending on market conditions and general stock valuations, yields can be lower or higher. A recession will drive the yield higher and vice-versa when the economy is going well.

Comparing Within Sector & Industry

Each sector and industry tend to support a certain dividend payout ratio and yield, it’s the nature of the business they are in.

If the yield is too far above the sector or industry, chances are the stock got beaten and there is something to look into. Same deal with the payout ratio. Same deal with the PE.

Opportunity Score

The score represents a technical opportunity based on today’s numbers using some historical trends.

The score has multiple numbers used together and they are broken down into the multiple grades.

  • Quote Grade: The price trend matters but sometimes, even if it’s high, it can still be an opportunity. Stocks are not zero sum games, they are expected to go up and up and up if the company makes money.
  • P/E Grade: Sector and industry have certain ranges and the P/E grade scores along those lines.
  • Revenue Growth Grade: Is the revenue growing or dropping?
  • Dividend Yield Grade: How good is the yield relative to the sector/industry.
  • Dividend Growth Grade: How good is the dividend growth relative to the sector/industry.
  • Dividend Payout Grade: How good is the payout ratio relative to the sector/industry.

The opportunity score is NOT a sell indicator. Do not assume the score can help you sell a stock. Selling a stock is a very different process from buying a stock. To decide on selling a stock, you need to assess it against your initial purchase criteria.

The opportunity score is NOT a valuation method. In fact, there are many valuation method and approaches. The price is actually a crowd derived valuation as investors buy and sell, it sets the value of the company. The Graham’s Number is another method and there are many more. The score will not identify an undervalued or overvalued stock.

Every investors is different and value different metrics and methods. The metrics listed are there to help many different dividend investors and the opportunity score, as a metric, focuses on the dividend quality (yield, growth and payout) as well as the price ratios.

My Approach

I can’t just make the formula work based on my criteria, otherwise only the stocks I like would be ranked well. If the stock I hold matters to you, see my dividend portfolio.

Instead, I rely heavily on the Chowder Score as I have found it to work well for selecting dividend growth stocks. I also look at dividend growth streaks and start with a 10 year streak and then I look at the opportunity score to see which one is more attractive to buy today since the score uses dividend quality and price ratios.

I also review the relative yield strength as it’s a good indicator of the value as “voted” by investors in the stock market.