Personalized Dividend Score
Updated: Apr 28
In this blog we explain how difficult it is to select a stock to purchase because possibly different dividend parameters may provide contradicting signals. We explain how the dividend score consisting of several parameters can help in deciding. We know that different investors have different priorities when making a purchase. We conclude that our personalized Dividend Score is an adapted dividend score to the needs and profile of each investor. We explain how to adapt this tool to your personal preferences.
We offer many tools to help investors make a wise decision when comparing stock and eventually deciding to purchase a given stock. There are so many tools that they may give contradictory information. For example the yield of stock A is higher than stock B, but stock B has steadily increased its dividend over the last years. The dividend CAGR of stock A over 5 years is great compared to stock B, but stock B has increased its dividend for much longer than stock A.
The dividend score is a way to encompass several dividend parameters into a single number. Each dividend parameter is translated to a score and then all scores are summed up to reach the dividend score. It is then much easier to make a decision. Many websites today offer their own dividend score for each stock. Some explain you how they calculated this score. Some websites may even give different weight to each parameter, justifying this by saying that one parameter is more important than another. But in the end there is one dividend score per stock, based on the website decision and experience.
We all know that different investors have different needs and different risk aversion. For example a retired person with limited capital will prioritize the current dividend yield to sustain its daily expenses. But he will also keep an eye on the payout ratio to limit the risk of a dividend cut. A young investor understanding compounding will prioritize the dividend growth, looking at the CAGR. As we explained in our blog describing the dividend CAGR, we must not ignore the averaging effect of the CAGR. One solution we proposed is to consider the CAGR over different periods. Therefore, the solution would be to have not only one CAGR as criteria, but several, each averaging over a different period of time. The risk avert investor will try to limit to the minimum the risk of dividend cut. His important parameters are then the payout ratio and the numbers of years the company has increased its dividend. The contrarian or opportunistic investor will want to but a stock when its current yield is much higher than the average yield over some years, but he will make sure that the payout ratio is still not extravagant.
Obviously these are some possible investor profiles, and you could imagine anything in between or totally different. Therefore, there is a need for a dividend score that adapts itself to the dividend investor. Our Personalized Dividend Score is exactly answering this need. We provide four preset investor profiles: "Dividend Growth", "Yield", "Opportunistic", and "Risk avert". By pressing the relevant button, the list of criteria is generated. Each criteria consists of the dividend parameter we would like to calculate for each of the listed stock symbols, the time period, if relevant, and the weight. The weight defines the importance of the criteria compared to the other criteria. The higher the weight, the more important the criteria. There is no upper limit to the weight. The tool will normalize all weights to percentages.
If you feel that you do not belong to any of these profiles, you disagree on the importance given to a certain parameter, or, the period for the average of the yield or CAGR, no problem. You can modify each criteria individually, to fit it exactly to your needs. You can remove or add criteria as you want, up to six criteria.
When you press on the submit button, the website will calculate your personalized dividend score for each of the stocks that you listed. This may take up to a minute if you have many stocks and many criteria.
The result is shown in a concise table in descending score order. The best stock appears on top. You can expand each score to have a detailed view of the calculation: what was the score of each of the criteria you selected, and its normalized weight.
Like for all other tools on our website, you can add the list of your favorite stocks with a click of a button, if you are registered.
You can try the Personalized Dividend Score for free on this page: