March 23, 2016
I can hardly believe it, but it has been nine months since I launched Dividend Grader. For those of you who may not have heard of it, Dividend Grader is my free tool designed to help investors discover the best dividend stocks the market has to offer. All users need to do is plug in any prospective dividend stocks into Dividend Grader's search function. The system then generates a letter grade of A, B, C, D or F for the stock(s).
Every Dividend Grader rating is based on my 4-factor proprietary system of Dividend Trend, Dividend Reliability, Forward Dividend Growth, and Earnings Yield. The final output also includes the stock's Fundamental and Quantitative Grades from Portfolio Grader.
Since I launched Dividend Grader, by far the most frequently asked question is some variation of this:
"Louis, when I went to plug in my stock into both Dividend Grader and Portfolio Grader, it generated different letter grades in each tool. Why is that? Which rating should I follow?"
If you've ever found yourself in the same situation, I'll cover what you need to know today.
The short answer is that Portfolio Grader and Dividend Grader are complementary services, but one doesn't necessarily supersede the other. The two rating systems target two separate asset classes: income stocks (Dividend Grader) and growth stocks (Portfolio Grader). If you're looking for an excellent dividend stock, Dividend Grader is better designed to assess a stock's income potential. If you're looking for an excellent growth stock, Portfolio Grader is better designed to assess a stock's growth potential.
Now, in an ideal scenario, stocks that earn A-ratings in both services represent the creme de la creme. Over the long run, these stocks have outperformed the S&P 500 by leaps and bounds, as you can see below:
However, the thing is that there are only a handful of AA stocks out there. For the other 1,000 stocks in my Dividend Grader service, you have to make a choice. Do you value income, or capital appreciation potential? If you answered "income," today I'll cover a few dozen top income opportunities. Tomorrow, I'll feature some of my top growth stocks.
I ran several hundred of the top dividend payers through both of my ratings services, and I found 33 stocks that rated highly in Dividend Grader, but barely squeaked by with a C-rating in Portfolio Grader. What this means is that when it comes to paying increasing dividends, these companies are the best. Another plus is that with one exception (PAG), these are all Conservative-rated stocks. However, their underlying shares may not grow quite as quickly as pure growth stocks. Here they are:
|33 Overlooked Income Opportunities|
|Ticker||Company||Dividend Yield||Dividend Grader Score||Portfolio Grader Score|
|AFSI||AmTrust Financial Services Inc.||2.1%||A||C|
|AIT||Applied Industrial Technologies Inc.||2.6%||B||C|
|COF||Capital One Financial Corp.||2.3%||A||C|
|ETN||Eaton Corp. Plc||3.5%||B||C|
|F||Ford Motor Company||4.4%||A||C|
|FLO||Flowers Foods Inc.||3.0%||A||C|
|FNF||Fidelity National Financial Inc.||2.5%||B||C|
|GEL||Genesis Energy L.P.||7.8%||A||C|
|GWW||W.W. Grainger Inc.||2.1%||B||C|
|HBAN||Huntington Bancshares Inc.||2.6%||B||C|
|IBM||International Business Machines||3.5%||A||C|
|MGA||Magna International Inc.||2.1%||A||C|
|MMP||Magellan Midstream Partners L.P.||4.3%||B||C|
|NHI||National Health Investors Inc.||5.2%||B||C|
|PAG||Penske Automotive Group Inc.||2.5%||A||C|
|PB||Prosperity Bancshares Inc.||2.4%||B||C|
|PNC||PNC Financial Services Group Inc.||2.4%||B||C|
|RF||Regions Financial Corp.||2.8%||A||C|
|SJI||South Jersey Industries Inc.||3.7%||A||C|
|STI||SunTrust Banks Inc.||2.6%||A||C|
|TROW||T. Rowe Price Group||2.8%||B||C|
|WFC||Wells Fargo & Company||3.0%||B||C|
|WYN||Wyndham Worldwide Corp.||2.1%||A||C|
So if you're looking for solid income opportunities that may be overlooked by Portfolio Grader, any of these 33 stocks would be a solid bet. Tomorrow, I'll feature stocks that I've selected with the growth investor in mind.