Learnings from the Grande Dame of Dividends, Geraldine Weiss

In Brief

A blue-chip focused screen inspired by the writings of Geraldine Weiss which is focused on buying blue-chip stocks whose dividend yields are near the high of their historical ranges.

Background 

One of the most famous female investors in the world, Geraldine Weiss is the former editor of the celebrated newsletter, Investment Quality Trends (http://www.iqtrends.com). The central idea behind her approach that one should purchase the top dividend paying stocks when the dividend yield is historically high, and sell them when the dividend yield declines to historic lows. In essence, the dividend yield become the barometer of value, rather than the P/E. 

Does it work?

A 2002 report indicated that "Investment Quality Trends was the number one performing investment newsletter (in the U.S.) on a risk-adjusted basis over the last 15 years, earning 12.4% annualized. It was placed third for the last ten years and third for the past five years".

Screen Criteria

According to a Forbes article of the same year (see below),  Weiss had seven criteria in total (of which the last criteria comprises a further 6 conditions):

1. Must be undervalued as measured by its dividend yield on a historical basis.

2. Must be a growth stock that has raised dividends at a compound annual rate of at least 10% over the past 12 years.

3. Is selling for two times book value or less.

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4. Has a P/E ratio of 20-to-1 or below.

5. Has a dividend payout ratio in the 50% area (or less) to ensure dividend safety with room for growth.

6. Debt is 50% or less of total capitalization.

7. Meets all six of Blue Chip Criteria: dividend raised five times in the last 12 years, carries an A rating from S&P, has at least 5 million shares outstanding, at least 80 institutional investors hold the stock, 25 uninterrupted years of dividends and earnings improvements in seven of the last 12 years.

How can I run this Screen? 

You can run this type of dividend screen and many more besides on Stockopedia PRO! While it’s difficult to replicate some of these screen criteria exactly for the UK market (e.g. the S&P A rating), we’ve given it a go and produced a Geraldine Weiss-lite version along similar lines (albeit based on six, rather than 12 years of fundamental history). You can see a summary of our approach and some initial UK screen candidates here. For access to our exclusive Beta, sign up now! 

From the Source:

Dividends don't Lie and The Dividend Connection (both available on Amazon) are two books authored by Weiss which details her investment approach.

Further Reading

• Forbes: Dividend Stocks Pay Off
• AAII on Weiss
• Valuepickr on Geraldine Weiss
• The Dividend Guy on Geraldine Weiss
• The Grande Dame of Dividends