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## Dividend Stocks Analysis Checklist

A dividend stocks analysis checklist that goes beyond more commonly used or popular metrics which might not be effective in the real world. There are some lesser known metrics which provide better indicators of future performance. We can use these to gain an advantage in analyzing dividend stocks.

The dividend stocks analysis checklist is divided into 4 sections: Company Analysis, Dividend Safety, Earnings Quality, and Valuation.

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## Cash Flow From Operations (CFO) Calculations & Ratios

Cash Flow From Operations (CFO) is the cash inflows and outflows of a company’s core business operations. It is an important line on the cash flow statement.

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## PEG Ratio: Useful or Obsolete Valuation Metric?

Several decades ago, when Peter Lynch popularized this ratio, simple metrics such as the PEG ratio served a valuable purpose; providing valuation guidelines for investors to follow in an era when metrics weren’t easily accessible. The trade off between price and growth is a concept every investor should understand.

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## Earnings Yield & How to Calculate Earnings Yield

Earnings Yield in its simplest form is earnings dividend by price. It is expressed as a percentage of the investment value and is the reciprocal of the price/earnings (PE ratio).

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## Market Capitalization: Calculation and Categories

The market capitalization calculation is an important and useful stock valuation formula for investment analysis. Market capitalization (a.k.a. market cap) is the total market value of all the company’s outstanding equity shares. This represents the total value the market has placed on the value of a company’s common stock.

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## Explain Free Cash Flow and Free Cash Flow Yield

Free Cash Flow determines whether a company has sufficient cash resources to meet the goals of the entity and its’ stakeholders (debt reduction, dividends, stock buybacks, acquisitions, etc.).
Free Cash Flow Yield determines if the stock price provides good value for the amount of free cash flow being generated.

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## Gross Profitability Ratio – Qualitative Analysis

The Gross Profitability Ratio is gaining credibility in value investing circles because it provides valuable and predictive qualitative analysis when combined with valuation metrics. Some analysts argue it is the single best qualitative metric with which to compare multiple stocks (particularly within the same industry) that have already been determined to be bargains.

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## Dividend Coverage Ratios: How Safe is Your Dividend?

Dividend Coverage Ratios allow analysts to evaluate the safety of a company’s dividend. Many investors concentrate on the dividend yield but don’t give sufficient attention to the safety of that dividend.

In the long run companies must create enough cash flow to pay expenses, invest in the future (capital expenditures), service their debt (if any), and return money to shareholders.

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## Dividend Yield: Definition, Calculation, & Relationship

Dividend yield is the annual dividend per share of a company compared to the price of the stock expressed as percentage. In other words it tells you the percentage dividend return the stock owner receives on the current price of a stock.

The dividend yield has historically provided approximately one-half of long term total stock market returns to investors. It’s a little less than one-half for those who take their dividend and little over one-half for those who reinvest their dividends.

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## Dividend Payout Ratio vs. Cash Dividend Payout Ratio

Dividend Payout Ratios provide us valuable information on how much money a company is returning to shareholders and their ability to pay and increase the dividend. One of these ratios is far superior to the other.

The Dividend Payout Ratio and the Cash Dividend Payout Ratio are compared to find out which is better at providing pertinent information to differentiate between various dividend paying companies.

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## Operating Earnings Yield (OEY) : Operating Income / Market Capitalization

Operating Earnings Yield is a profitability and valuation ratio; one of my favorite for company stock analysis. This metric provides valuable information about a company’s profitability and how much you are paying for those profits via the stock price.

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## Net Financial Debt and Ratios: Analyzing Leverage & Risk

Net Financial Debt and its ratios are an effective and efficient metric when analyzing companies. These metrics are more important than ever because of the corporate trend to leave cash overseas and borrow domestically.

The balance sheet is the foundation from which a company operates its business. A company’s liquidity and the leverage used play a big role in the success or failure of a business. Net Financial Debt is a critical metric for investment analysis.

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## Altman Z-Score Formula – Screening For Bankruptcy Risk

As value investors, one of our most important rules is to avoid incurring large losses. There are two easy ways to subject yourself to possible large losses; buy stocks for more than they’re worth, and buy stocks of companies that go bankrupt. The Altman Z-Score is a formula of 5 basic financial ratios to help determine the financial health of a company. In particular, it is a probabilistic model to screen for bankruptcy risk of a company.

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## Graham Number: Stock Screen for Dividend Investors

The Graham Number is part of Benjamin Graham’s stock screen for dividend investors. It uses price in relation to earnings and book value to identify the relative valuations of stable dividend stocks.

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## Return on Capital – Calculations & Ratios

Return on capital ratios provide the value investor with quality metrics that can be employed after, or along side, valuation metrics. This allows the long term investor to look for “wonderful companies at a fair price” (Warren Buffett).

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## Return on Total Assets – Ratios & Calculations

Return on Total Assets Ratios provide analysts with an indication of management efficiency in utilizing company assets to create profits. Because it includes all (total) assets (assets funded by debt and equity) it is a profitability ratio that interests both creditor and equity stakeholders.

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## What is Owner Earnings and Owners’ Cash Profits?

Owner Earnings and Owners’ Cash Profits are similar types of cash flow for analysis of businesses and stocks. These metrics provide important insight into the cash flow of the entity, particularly the cash flow available for the owners.

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## Types of Cash Flow and Cash Flow Calculations Guide

Are you ever confused by the different types of cash flow for investment analysis? There are too many cash flow calculations for most of us to have in memory. I know I get them confused and I’m a seasoned investor.

I believe you will find this a useful guide to the different types of cash flow and cash flow calculations, along with practical step by step comparisons and uses for each metric.

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## Working Capital and Working Capital Calculations

Working capital is an important measure of a company’s operating liquidity. The working capital ratio (a.k.a current ratio) is an indicator of the ability of the company to meet its short term obligations.

Working capital calculations such as Net Current Asset Value (NCAV) and Net Net Working Capital (NNWC) provide valuable metrics with which to measure against price in order to identify bargain stocks.

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