Definitions
Chowder is a shorthand term created by a contributor to SeekingAlpha.com named “Chowder,” most likely someone from Massachusetts. It is simply the sum of the current dividend yield and the five year dividend growth rate. For example, a dividend paying stock with a 2.75% yield and a 9.25% 5-year dividend growth rate has a Chowder of 12.0%. Chowder is used as an easy shorthand for comparing alternative dividend stock investments.
The class of a dividend stock is determined by the number of our criterion that each stock meets. We have five criteria as follows:
- Debt to Equity ratio (pass or fail varies by sector)
- Payout Ratio (pass or fail varies by sector)
- Beta
- Free Cash Flow growth must be positive
- Dividend Growth Rate must be positive
If a stock meets all of our criteria, it is deemed First Class. If the stock fails one criterion, it’s deemed Second Class, and so on. Generally, if a stock has failed two out of 5 criteria (meaning it’s Third Class) and below, you might want to find another stock.
Stocks that have achieved a minimum of 7 years of increasing dividends.
Similar to Chowder, Guac is a Dividend System-created term that is simply the Dividend Growth Rate and the Free Cash Flow Growth Rate added together. Gauc can be for either 5-year or 10-year horizons.
For example, if a stock has a 5-year dividend growth rate of 6.5% and a 5-year free cash flow growth rate of 8.25%, the Guac is 14.75%.
More Guac the better! And in case you are wondering, Guac stands for Generally Useful Approximate Comparison. It’s really good on toast!
For a dividend stock to be considered “Premier” in our system, it must be ranked in the top thirty percent (30%) of the stocks in its sector. Premier stocks generally have higher total returns than non-Premier stocks.
We rate the stocks in our Dividend Universe on a variety of factors. We determine if a stock’s past indicates whether it is more focused on delivering growth, income (in the form of dividends), a mix of growth and income, or whether it’s a ‘value trap.’ We then assign ratings for Growth, Income, Growth, Growth and Income, Dividend Safety, and Results. The ratings are done with formulas that take into account many factors, such as total return, yield, dividend growth, dividend coverage, etc.