Nick | Dividend Investor & Educator

Nick | Dividend Investor & Educator

17-11-2022

17:17

I’ve been able to create $12,400 a year in dividend income…. Here are my 5 key metrics I use when I’m picking a stock to invest in 🧵

PE Ratio Price to earnings ratio. The ratio of a company's share price to the company's earnings per share. I use this metric to determine if a stock is currently under or overvalued. Typically, I use the S&P 500’s PE ratio as my measuring stick. My PE ratio sweet spot is 13-18

Payout ratio The dividend payout ratio is the total amount of dividends paid out to shareholders relative to the net income of the companies earnings. The lower the number, the more room the company has to increase their dividend. My payout ratio sweet spot is 40-70%

Dividend history This gives you an inside look as to how long the company has been paying their dividend to shareholders in consecutive years. I like to see a dividend history of 10+ consecutive years. Theres always wiggle room with new companies and this metric.

Dividend growth 5 year CAGR This metric shows you how the dividend has grown over a period of 5 years. Compound Annual Growth Rate measures the average compound annualized growth of the dividend per share over time. I like to see a growth rate of 8-10% over a 5 year span.

Dividend yield The least important in my opinion. The dividend yield is a percentage showing the ratio of a company's annual dividend compared to its share price. Very subjective but I like to see a dividend yield of 3-5%. There’s always expectations to the rule.

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