Dividends4Life: Using Math To Identify Top Dividend Stocks

Using Math To Identify Top Dividend Stocks

Posted by D4L | Friday, March 15, 2013 | | 0 comments »

A good metric for looking at how a company has done over the past few years is to look at their compound annual growth rate, or CAGR for short. Recently I have been looking at this figure a lot more when I research great dividend paying stocks for investments. I use the number that the CAGR formula pumps out in conjunction with the yield and the yield growth to check if a company is worth a further look.

Before we jump in, it’s probably best to make sure that you know exactly what CAGR is and how you can calculate it. What you’re going to need is a start value, an end value, and a time frame. My time frame is typically five years. From there, you’ll end up with a formula that looks like this and can be used in Excel for efficiency in calculation: ((End-Beginning)^(1/time))-1

Source: Motley Fool

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