Quick Dividend Stock Comparison

When comparing dividend stocks, there are countless metrics, calculations, sorts, charts and analyses that can be performed. But what if you are not a financial analyst, it’s likely you need a quick method, a rule of thumb, to compare stocks in disparate industries when deciding how to invest your money. Fortunately we have two handy-dandy rules that will give you quick comparative guidance on any stocks


Created by SeekingAlpha.com member Chowder, ‘Chowder’ is a proxy for total return. Simply add together the 1-year dividend growth rate and the yield. For example, Illinois Tool Works’ (ITW) current dividend yield at time of writing is 2.12% and the 1-year dividend growth rate is 6.9%, therefore the “Chowder” is 9.02%. And for United Health (UNH), current dividend yield at time of writing is 1.33% and the 1-year dividend growth rate is 17.7%, therefore the “Chowder” is 18.03%. As a quick comparison of Chowder, it looks like UNH would be the obvious choice. Of course, we recommend a bit more research than one rule of thumb, but at least you would know which one to research first!

Calculating Chowder
Dividend Yield2.12%1.33%
Dividend Growth Rate 1-year6.9%17.7%

DivSys5 and DivSys10 Scores

What kind of investing blog would we be without having our own jargon, rules of thumb, arcane abbreviations, and an overuse of the cute trademark symbol? Without those key elements, we’d be laughed out of the blogosphere!

The foundation for our “DivSys” scores can be found in these investing facts:

  • Growing or high Free Cash Flow growth is highly correlated with the total return of a dividend stock
  • Dividend Growth is highly correlated (though not as much as FCF) with a dividend stock’s total return

To obtain a DivSys score for a stock your are considering investing in, simply add the Free Cash Flow growth and the dividend growth together, and you get a score that allows you to compare investment choices quickly.

Let’s look at Pepsi (PEP) and Coke (KO).

Calculating DivSys5
StockPepsiCoca Cola
FCF 5-year Growth Rate-5.8%-1.9%
Dividend 5-year Growth Rate8.6%5.6

As you can see, at first glance, DivSys scores indicate that Coke (KO) would be a slightly more productive investment.


Time is finite, so the use of rules of thumb can help us thin out the choices available, so that we can use the time we do have to more deeply research stock candidates.

What rules of thumb do you use in searching for investment candidates?

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