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Understanding Dividend.com Rating and Recommendations

May 29, 2020

Dividend.com features plenty of tools, articles, and other information designed to help you become a better investor. Perhaps none is as innovative as our proprietary Dividend Advantage Rating System (DARS), which we are renaming as Dividend.com Rating.

Our premium feature uses a sophisticated algorithm to rate various common equities, ADRs, REITs, and MLPs listed on Dividend.com. The model relies on a combination of five metrics, including dividend yield, payout ratio, P/E ratio, momentum, and earnings estimates to find the answer to a simple question: Should you consider this dividend in your portfolio or not?

DARS forms the basis of Dividend.com’s Best Dividend Stocks List and has helped numerous investors to find great income and plenty of capital appreciation from their portfolios. But that doesn’t mean the best can’t get better. And with that, Dividend.com is proud to announce that DARS has been renamed to Dividend.com Rating.

With the relaunch, premium members will be able to access the rating across all the existing and future tools and content on Dividend.com, such as the recently revamped ticker pages. It’s all in the name of helping you become a better income investor.

Non-premium members will also be able to experience Dividend.com Rating via the new Free Credit initiative. Each month, Dividend.com will provide four credits that can be used in the following way.

- 2 credits to reveal Dividend.com Rating for 2 different tickers like shown below

UNP rating credit count

- 2 credits to reveal dividend payout estimates for two different tickers like shown below

AAPL

In the end, the propriety rating system is designed to make your Dividend.com experience that much better.

Be sure to check our Dividend Screener to find income securities of your choice.

What Is Dividend.com Rating and Recommendation System?

The whole goal and focus of Dividend.com is to make dividend investing easier for long-term and income-seeking investors. To that end, using various academic studies and research, Dividend.com has designed the rating system to help drive portfolio decisions through a number that is easier to compare and digest. With the Dividend.com Rating system, investors and financial advisors can quickly and simply look at two or more stocks and see which fits their needs. It makes buying and selling decisions a more relaxing experience.

The secret to the rating system is in the sauce.

Dividend.com Rating uses up-to-date data to compile five key metrics of success: Relative Strength, Yield Attractiveness, Dividend Reliability, Dividend Uptrend, and Earnings Growth. Each of these metrics play together to form an overall rating for a stock, indicating future performance potential.

Relative Strength: Relative strength looks at how well a stock is performing with regard to share price and upward trends. Forward momentum is important as it indicates the best combination of dividends and capital gains for a high total return.

Yield Attractiveness: Too high or too low of a yield can indicate an uncaring management or problems with the firm’s business. Finding stocks within the so-called ‘sweet spot’ of yields eliminates these problems and can help you narrow down growth and value opportunities.

Dividend Reliability: A great dividend is meaningless if a firm can’t keep it going for the long haul. That’s where payout ratio comes in handy. A low to medium payout ratio is a solid way to determine a stock’s future potential for higher dividends down the road as well as its ability to continue investing in its business.

Dividend Uptrend: We all love getting a good value. To that end, it’s important not to overpay for a stock. By looking at forward price-to-earnings ratios, Dividend.com Rating system can hone in on those stocks that offer the best combination of growth at a reasonable price. It also eliminates value traps that might be too good to be true.

Earnings Growth: Without steady and constant earnings, there are no dividends or capital appreciation. By looking at forward EPS growth, Dividend.com Rating system can find those stocks that offer consistent profit increases and plenty of potential to raise dividends further. The metric eliminates those firms with wild EPS swings in either direction.

Dividend.com Rating system assigns a score for each of the above parameters based on our algorithm that shifts with market trends. Together, they form the basis for a simple recommendation bucket for any stock.

*Overall Rating 0 to 2.5 indicates ‘Avoid’
*Overall Rating 2.6 to 3.5 indicates ‘Neutral’
*Overall Rating 3.6 to 4.5 indicates ‘Fair’
*Overall Rating 4.6 to 5.0 indicates ‘Quality’

The top 20 stocks in our rating system form the basis for our premium Best Dividend Stocks List..

Using Dividend.com Rating for Your Financial Goals

With Dividend.com’s easy to digest rating system, investors and their advisors have the ability to quickly compare stocks to find the best opportunities for their needs. Stocks with higher rating scores should be given preference over those with lower ones.

It’s easy to find Dividend.com Rating on individual ticker pages. Take a look at the ticker page for retailer Walmart (WMT).

WMT ticker with rating locked

The ultimate goal of the Dividend.com Rating is to help investors quickly compare and find those opportunities for their own goals. Need a high yield? Dividend.com Rating can help you find the best of the best. Looking for more of a total return? Here again, Dividend.com’s screeners combined with Dividend.com Rating can provide plenty of idea generation for your portfolio.

The Bottom Line

Dividend.com Rating takes the guesswork out of picking the right stocks. Combining the five key metrics of success, the system provides an easy to understand number that investors can use to build their portfolios. It’s primarily available to premium members, but it’s a vital tool worthy of an upgrade.

Don’t forget to upgrade here to get access to our premium tools including Dividend.com Rating.

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