The Chowder Rule: A Path to High Total Return Dividend Stocks
Searching for high total return stocks for your dividend growth portfolio? Look no further than the Chowder Rule. This rule-based system, developed by Seeking Alpha contributor Chowder, combines dividend yield and growth to identify stocks with strong total return potential.
Let’s delve into the methodology of the Chowder Rule and explore how it can benefit your investment strategy.
Rules Based on Intelligent Investing Concepts
The Chowder Rule merges two intelligent investing concepts to optimize your returns:
- Expected Total Return Investing: This strategy focuses on businesses with the highest expected compound annual growth rate, considering dividends, per-share growth, and valuation changes.
- Margin of Safety: Popularized by Benjamin Graham, this principle emphasizes buying stocks below their fair value, ensuring a safety margin to protect your investments.
Goals of the Chowder Rule
The ultimate aim of the Chowder Rule is to achieve a long-term compound annual growth rate of over 8%. By combining the margin of safety concept with total return thinking, this rule offers a strategic approach to stock selection.
Improving the Chowder Rule
While the Chowder Rule has its merits, one potential area of improvement lies in the reliability of using the 5-year dividend growth rate for growth projections. Earnings-per-share growth can offer a more accurate indicator of a company’s underlying growth potential.
Stocks with 25+ Years of Dividend Growth & The Chowder Rule
A select group of securities in The Sure Analysis Research Database boasts 25+ years of consecutive dividend increases, making them ideal candidates for the Chowder Rule evaluation. By calculating the Chowder Number for these stocks, we identify those that meet the rule’s criteria for high-quality investments.
Here are some examples of securities that pass the Chowder Rule:
3%+ Yielding Securities:
– Stepan Co. (SCL)
– Target Corporation (TGT)
– Arrow Financial (AROW)
– Enterprise Products Partners LP (EPD)
Securities with Yields Under 3%:
– Stepan Co. (SCL)
Utilities:
– SJW Group (SJW)
– Fortis (FTS)
– NextEra Energy (NEE)
– New Jersey Resources (NJR)
– Entergy (ETR)
– Canadian Utilities (CDUAF)
– Atmos Energy (ATO)
– Artesian Resources (ARTNA)
– Eversource Energy (ES)
– Essential Utilities Inc. (WTRG)
– Northwest Natural Holding Company (NWN)
– Black Hills Corporation (BKH)
Conclusion
The Chowder Rule offers a valuable framework for identifying top-performing dividend growth stocks. By amalgamating intelligent investing concepts with high-quality securities, this rule sets a high standard for investment selection. Consider incorporating the Chowder Rule into your portfolio strategy for long-term wealth creation.
