COMPOUND INCOME SCORES
These have been used to produce the Portfolio Performance shown on the Portfolio page. If you would are interested in learning more about the Scores and what's behind them then read on to discover more and find out how you can gain access to them, see full details of the Portfolio and all the transactions. If you choose to subscribe you will also get a FREE e-book detailing the thinking and academic research behind the Scores.
Further details on the Scores:
In light of the above evidence & since I am aiming to grow my capital and income in real terms over time, I therefore look to Compound Quality Growing Income or CQGI, this is the essence of Compound Income.
The Compound Income Scores (CIS) are designed as a way to help me do this by quickly identifying UK listed equities which are offering good value, with robust operating characteristics and a yield that is well covered, which has been growing consistently and is forecast to grow in the current year with those forecasts ideally supported by positive estimate revisions.These are then presented in a table with scores on each of the underlying metrics which are value, dividend cover, dividend growth, financial security, operational quality and estimate revisions. These are then re-ranked to give the Compound Income Score or CI↑ Score with 100 being the best and 0 the worst.
Points to note are that the highest ranked stocks will not necessarily have highest yields given all the other factors being taken into account and evidence presented below that suggests that the 4th quintile of yields rather than the 5th or highest quintile tends to perform better. This is mostly due to the highest yields tending to be less well covered and therefore more vulnerable to being cut with a knock on effect to returns.
However, with the scores being broken down by the different factors including cover and with other valuation metrics like P/E and EBIT/EV being presented, it is quite easy to get a quick feel for a stock and why it scores well. I have also added price momentum, over bought / over sold indicators and dividend growth figures both 5 year historic and one year forecast as well as a suggested sustainable growth rate based on the payout ratio and average ROCE. Market capitalisation and enterprise value figures are also presented so you can get a feel for the size of the Company and its debt / cash levels at a glance.
Finally I have also added an indicator which I call EVER. This is my alternative to a PEG ratio which growth investors use. In this I compare the EBIT/EV multiple (the EV as I prefer to use EV based measures) and compare this to the the expected return (the ER which simplistically is the current Y1 yield + the forecast Y1 dividend growth). Thus the lower this ratio the better as it means you are paying less for the expected return assuming no change in the rating. However, hopefully if you are buying a stock which is expected to provide a large total return at a cheap price, you might also get a re-rating although of course nothing is guaranteed. But it does at least help to compare and differentiate between stocks with differing yields and growth rates. There are also some final columns which which look at suggested expected returns based on the dividend growth metrics.
I find this a useful way of identifying interesting candidates for further research and you can also use the spreadsheet as a way of sorting or filtering by particular metrics. For example you could filter the list by top 40% of CI↑Scores with a yield of at least say 3% and dividend growth of at least 2% to give a reduced list of stocks from which you could pick. That is just a suggestion of course, you can filter and sort on any of the metrics. This gives it more flexibility than a screener which you would have to enter lots of different minimum / maximum values in to cover these data inputs and probably end up with only a handful of stocks in the list and no idea of how they compared with the excluded companies. However, I would not recommend just buying the highest scoring stocks, these should be used as a guide to those stocks which may be worthy or further research and help to steer you away from those that are potentially unattractive.
The CI↑Scores therefore give you a quick overview of more than 500 UK listed stocks ranging from FTSE 100 down to AIM. I have excluded zero yields from the list although I did relax this for FTSE stocks for the sake of completeness at the larger end of the scale.
These have been used to produce the Portfolio Performance shown on the Portfolio page. If you would are interested in learning more about the Scores and what's behind them then read on to discover more and find out how you can gain access to them, see full details of the Portfolio and all the transactions. If you choose to subscribe you will also get a FREE e-book detailing the thinking and academic research behind the Scores.
SUBSCRIBE HERE USING THESE LINKS:
Please use this link if you would like to subscribe to the Compound Income Scores & Portfolio in your Dropbox.
Please use this link if you would like to subscribe to the Compound Income Scores & Portfolio in your Google Drive.
Please note this is not an automatic process as it has to be done manually, but we will endeavour to do it as quickly as possible once we receive notification of your request and your payment instructions are set up. So once you sign up look out for an e-mail from us and your chosen service with an invitation to view the Scores file & please do check your junk mail folder too as sometimes these end up there.
Once you are signed up the Scores will update automatically in your Dropbox, Google drive or Microsoft OneDrive (see subscription link below for this option) in your shared files folder each time the scores are updated. This is done on a Daily basis except for holiday time or when I am away, but this means you should get at least 48 weeks worth of Scores per year which therefore works out at a bargain price equivalent to just 20 pence per day.
If you are unfamiliar with Dropbox and want to learn more and set one up then see this link for more information.
If you are unfamiliar with Google Drive and want to learn more and set one up then see this link for more information.
Hypothetical Growth of 1 Million From January 1928 to December 2017 shown in Chart Below:
These have been used to produce the Portfolio Performance shown on the Portfolio page. If you would are interested in learning more about the Scores and what's behind them then read on to discover more and find out how you can gain access to them, see full details of the Portfolio and all the transactions. If you choose to subscribe you will also get a FREE e-book detailing the thinking and academic research behind the Scores.
Further details on the Scores:
In light of the above evidence & since I am aiming to grow my capital and income in real terms over time, I therefore look to Compound Quality Growing Income or CQGI, this is the essence of Compound Income.
The Compound Income Scores (CIS) are designed as a way to help me do this by quickly identifying UK listed equities which are offering good value, with robust operating characteristics and a yield that is well covered, which has been growing consistently and is forecast to grow in the current year with those forecasts ideally supported by positive estimate revisions.These are then presented in a table with scores on each of the underlying metrics which are value, dividend cover, dividend growth, financial security, operational quality and estimate revisions. These are then re-ranked to give the Compound Income Score or CI↑ Score with 100 being the best and 0 the worst.
Points to note are that the highest ranked stocks will not necessarily have highest yields given all the other factors being taken into account and evidence presented below that suggests that the 4th quintile of yields rather than the 5th or highest quintile tends to perform better. This is mostly due to the highest yields tending to be less well covered and therefore more vulnerable to being cut with a knock on effect to returns.
However, with the scores being broken down by the different factors including cover and with other valuation metrics like P/E and EBIT/EV being presented, it is quite easy to get a quick feel for a stock and why it scores well. I have also added price momentum, over bought / over sold indicators and dividend growth figures both 5 year historic and one year forecast as well as a suggested sustainable growth rate based on the payout ratio and average ROCE. Market capitalisation and enterprise value figures are also presented so you can get a feel for the size of the Company and its debt / cash levels at a glance.
Finally I have also added an indicator which I call EVER. This is my alternative to a PEG ratio which growth investors use. In this I compare the EBIT/EV multiple (the EV as I prefer to use EV based measures) and compare this to the the expected return (the ER which simplistically is the current Y1 yield + the forecast Y1 dividend growth). Thus the lower this ratio the better as it means you are paying less for the expected return assuming no change in the rating. However, hopefully if you are buying a stock which is expected to provide a large total return at a cheap price, you might also get a re-rating although of course nothing is guaranteed. But it does at least help to compare and differentiate between stocks with differing yields and growth rates. There are also some final columns which which look at suggested expected returns based on the dividend growth metrics.
I find this a useful way of identifying interesting candidates for further research and you can also use the spreadsheet as a way of sorting or filtering by particular metrics. For example you could filter the list by top 40% of CI↑Scores with a yield of at least say 3% and dividend growth of at least 2% to give a reduced list of stocks from which you could pick. That is just a suggestion of course, you can filter and sort on any of the metrics. This gives it more flexibility than a screener which you would have to enter lots of different minimum / maximum values in to cover these data inputs and probably end up with only a handful of stocks in the list and no idea of how they compared with the excluded companies. However, I would not recommend just buying the highest scoring stocks, these should be used as a guide to those stocks which may be worthy or further research and help to steer you away from those that are potentially unattractive.
The CI↑Scores therefore give you a quick overview of more than 500 UK listed stocks ranging from FTSE 100 down to AIM. I have excluded zero yields from the list although I did relax this for FTSE stocks for the sake of completeness at the larger end of the scale.
These have been used to produce the Portfolio Performance shown on the Portfolio page. If you would are interested in learning more about the Scores and what's behind them then read on to discover more and find out how you can gain access to them, see full details of the Portfolio and all the transactions. If you choose to subscribe you will also get a FREE e-book detailing the thinking and academic research behind the Scores.
SUBSCRIBE HERE USING THESE LINKS:
Please use this link if you would like to subscribe to the Compound Income Scores & Portfolio in your Dropbox.
Please use this link if you would like to subscribe to the Compound Income Scores & Portfolio in your Google Drive.
Please note this is not an automatic process as it has to be done manually, but we will endeavour to do it as quickly as possible once we receive notification of your request and your payment instructions are set up. So once you sign up look out for an e-mail from us and your chosen service with an invitation to view the Scores file & please do check your junk mail folder too as sometimes these end up there.
Once you are signed up the Scores will update automatically in your Dropbox, Google drive or Microsoft OneDrive (see subscription link below for this option) in your shared files folder each time the scores are updated. This is done on a Daily basis except for holiday time or when I am away, but this means you should get at least 48 weeks worth of Scores per year which therefore works out at a bargain price equivalent to just 20 pence per day.
If you are unfamiliar with Dropbox and want to learn more and set one up then see this link for more information.
If you are unfamiliar with Google Drive and want to learn more and set one up then see this link for more information.
Hypothetical Growth of 1 Million From January 1928 to December 2017 shown in Chart Below:
Source: Kenneth R. French© and CRSP, 1/1/1928 to 12/31/2017
Past performance does not guarantee future results. The hypothetical example is for illustrative purposes only and does not represent the returns of any particular investment. All indices mentioned are unmanaged. It is not possible to invest directly in an index.
Disclaimer
The Scores should not be construed as investment advice or a recommendation to buy or sell any of the shares mentioned. Readers should remember that share based investments can go down as well as up and you should only invest with capital that you can afford to lose. You should also generally get professional advice before investing unless you are happy to do so without.
Compound Income makes no representations as to the accuracy or completeness of any information on the website or found by following any link on the website and will not be liable for any errors, omissions or delays in this information or any losses, injuries or damages arising from its display and use. All information is provided on an as is basis and this is an unregulated service.
Past performance does not guarantee future results. The hypothetical example is for illustrative purposes only and does not represent the returns of any particular investment. All indices mentioned are unmanaged. It is not possible to invest directly in an index.
Disclaimer
The Scores should not be construed as investment advice or a recommendation to buy or sell any of the shares mentioned. Readers should remember that share based investments can go down as well as up and you should only invest with capital that you can afford to lose. You should also generally get professional advice before investing unless you are happy to do so without.
Compound Income makes no representations as to the accuracy or completeness of any information on the website or found by following any link on the website and will not be liable for any errors, omissions or delays in this information or any losses, injuries or damages arising from its display and use. All information is provided on an as is basis and this is an unregulated service.
