Stock Picks – High Dividend Stock Screen: 2-26-2016

No picks from the High Dividend screen this week – the rally the last few days has eliminated most of the opportunities I have been tracking.

Market valuations are getting too high again – the S&P 500 is currently trading at a 10 year average PE Ratio of 24.70.  The long term average for this ratio is 16.65.

If you simply look at the current PE of the S&P 500 – on a pro forma (manipulate basis), the S&P trades at 17 times 2015 earnings.  But that shoots up to over 21 times under GAAP rules.  The long term average is 15.58.

Here is a very good article summarizing the GAAP vs Pro-forma issue:

• Seeking Alpha – Are Corporate Earnings Really What They Seem?

So, when the talking heads on CNBC tell you that the S&P 500 is cheap and should be bought – you need to ask yourself – what specific metrics are they talking about?

Here are the screen inputs:

1. Morningstar analysis available.
2. Dividend Yield % > = 4.
3. Dividend Growth % Past 5 Years > = 10.
4. Payout Ratio Trailing 12 Months < 75
5. Morningstar rating 4 or more stars.
6. Financial Health Grade >= B.
7. Stock Industry not = Asset Management
8. Forward P/E <= 20.