The Five-Box Checklist
A good dividend stock has to clear five boxes. Run any stock through these before you buy. It is the exact test behind every pick on this site, and behind the DividendAbundance Score.
- 1Does it pay a dividend? The entry ticket. No dividend, no further conversation. Look for a regular, established payout, and give extra credit for a long, uninterrupted history with no cuts.
- 2Does it raise the dividend consistently? A history of increases, ideally through good times and bad. A company that has raised its dividend for 10, 15, or 25 years has proven it can. A pause or a cut is a yellow flag.
- 3Is the dividend safe? Check the payout ratio, the share of earnings that goes out as dividends. Under about 50% leaves lots of room to keep raising; over 100% means the company pays out more than it earns, which can't last. For REITs, use funds from operations instead of earnings.
- 4Is it undervalued? Don't overpay, even for a great company. A simple gauge: compare today's dividend yield to the stock's own five-year average. A higher-than-usual yield often means the stock is on sale.
- 5Is the yield high enough to matter? The box people forget. A wonderful company with a 0.5% yield won't build much income. Make sure the yield is meaningful for your goals, high enough to matter, without chasing a too-good-to-be-true number.
The shortcut: that is exactly what the DividendAbundance Score does. It turns these five boxes into a single number from 5 to 100, so you can compare stocks at a glance. See how it works.
Not financial advice. A framework to think with, not a recommendation to act on.