Abro hilo para este colaborador de Seeking Alpha que lleva varios años publicando la estrategia y movimientos de su cartera DGI con periodicidad trimestral.
Admito que la simplicidad de su sistema de inversión me ha “enamorado”
The K.I.S.S. System
Over the past six years, I have been developing and refining my Keep It Simple, Stupid (K.I.S.S.) system for creating a dividend growth portfolio. The system I developed has been discussed in my previous updates, but as a quick summary, my criteria for buying stocks are as follows:
For Purchase of Regular Stocks
- The stock is on the Dividend Champions, Contenders and Challengers (“CCC”) list (as previously compiled by David Fish, but now compiled by Justin Law); (Thank you, David. You will be missed. I couldn’t have done any of this without you)
- The payout ratio < 60%;
- For stocks with a yield between 2.0% and 2.5%, the Chowder Number (Dividend yield + 5-yr dividend growth rate) >16;
- For stocks with a yield between 2.5% and 3.0%, the Chowder Number (Dividend yield + 5-yr dividend growth rate) >14;
- For stocks with a yield greater than 3.0%, the Chowder Number (Dividend yield + 5-yr dividend growth rate) >12;
- A credit rating of BBB- (Investment grade) or better from S&P (found on F.A.S.T. Graphs); and
- F.A.S.T. Graphs shows a 10-year uptrend in earnings, and shows that the stock is not overvalued.
The Chowder number is the 5 year dividend growth rate plus the present dividend yield. The use of different Chowder Number requirements is a change I made to my criteria over the past few years. I prefer to have stocks with higher yields, but if the rest of the story is compelling enough, I am willing to buy stocks with yields in the 2.0% to 3.0% range if their DGRs and Chowder Numbers are higher, as shown in my criteria above. Please see the previous article I wrote about different yields, DGRs and Chowder Numbers to read about my thinking on this topic.
For Purchase of MLPs, REITs, Utilities and Telecoms (High Yielders)
- The stock is on CCC list;
- Yield > 4%;
- Chowder Number > 8%;
- DGR for all time periods (1-yr., 3-yr., 5-yr. and 10-yr.) of at least 4.0%;
- F.A.S.T. Graph shows a 10-year uptrend (or for the life of the company, if less than 10 years) in funds from operations ("FFO"); and
- F.A.S.T. Graph shows that the stock is not overvalued based on its FFO.
The time it takes to run this screen is only about 2-3 hours per quarter since most of the work has already been done for us by way of the CCC list, F.A.S.T. Graphs and S&P.
My criteria for selling a stock are also very simple. I will only sell if the stock cuts its dividend. I do not look at anything else when deciding whether or not to sell. Therefore, the only other work that needs to be done during the quarter is to watch for the dividend announcement from each company and put in a sell order if there is a dividend cut. One caveat, as I mention below, I will sell spin-offs from my stocks if those new companies don't have dividend policies I'm comfortable or familiar with. Again, it comes down to the dividend.