While choosing a stock, make sure you are in line with guidelines of stock portfolio management, described in Eudividend Investing System. For that you have to consider the following metrics.

  • Market conditions. Do not invest when a market is in clear downturn.
  • Diversify your portfolio by 5-6 industries with 3-5 companies in each of them.
  • Pay attention to the size of company. Larger companies are preferable to smaller ones.


  • Understand how company performed in the past
  • Understand its current situation
  • Evaluate how can the future of company unfold

Then apply your judgement how you see the balance of the past, current and future company conditions.

Is that particular combination right for you?

Is it something you are looking for?

Do you understand how company makes money?

Are you ready to share good and bad times with that company?

The decision you take depends on your personal attitude to risk, on the level of your experience and confidence in investing.

Eudividend tools facilitate this decision making process. In order to investigate a particular stock, you can enter ticker on Eudividend stock screen and see company’s past performance graphs. Comments next to each graph guide you how to judge the company’s performance in respect of data on a graph.

Past Performance of Company

Let’s look at the fundamental data in more detail. We know that past performance does not guarantee future results. However, we can use it as one of the indicators of company’s future performance. It allows judging how company performs relative to its peers.


Company’s dividend yield should not be too low. If it is, a stock as dividend payer is less useful for income investor. However a dividend yield should not be too high as well. Too high yields usually are indication that a price of stock is very low and probably company is in trouble. Consider stocks with dividend yields of 8% per annum or higher to be too risky for your portfolio of stocks. Look for dividend yield slightly higher than the industry average.


Share price fluctuations are much higher than those of earnings or dividends. Over longer term price of share should reflect dividend growth. So, check how much price growth follows dividend growth. Also check for price up trend in the last 3-4 quarters.


Payout ratio (POR), dividend per share divided by earnings per share, shows how sustainable are dividend payments. Many companies target certain payout ratio in their dividend policy. Look for stable payout ratios over longer periods of time. Payout ratios within the range of 40% to 60% are preferable. The ones above 80% are too high for majority of industries. It means that almost all earnings of company are paid out in dividends and there is less scope for future business development and subsequent dividend increases. Payout ratio below 40% usually means quite low dividend income for investor.


Sales growth rate can differ substantially amongst industries. Regardless of industry, look for consistent smooth growth over years. Smaller companies usually grow faster than larger ones. As in the case of earnings, look for double digit year on year grow of sales for small, medium companies and single digit growth for larger ones. Evaluate how resistant company’s sales are relative to business cycles by checking how company behaved in the past during economic downturns. Look for companies with sales growth above that of other companies in its industry. Pay special attention to the sales growth in the latest quarters. Look for any anomaly in data and find out the reason for it.


Debt to equity ratio (D/E) shows how much debt company is using relative to shareholders equity. The level of indebtedness differs by industry. Look for less indebted companies, for companies with debt to equity ratio below that of peers. Look for any significant changes in debt and check reasons for that change.


Dividends are (mostly) paid out of cash. Cash flow per share (C/F) is earnings per share plus depreciation per share. Look for company that has steady and consistent cash flow numbers. Look for cash flow per share that is higher than dividend, because it means that company has enough cash to pay dividend. Look through all of these indicators and decide whether company is one of the best in its industry.


History of dividend payments is important consideration. The longer company pays dividends the higher are chances it will continue doing so in the future. History of regular dividend increases shows how much management is committed to consistent dividend policy. It shows as well company’s financial capability to conduct consistent dividend policy. Once increased, dividend should be supported in the future. So, one can expect that they are increased in prudent and responsible way. Look for companies with longer periods of dividend increases. Companies with higher dividend growth and longer history of growth are preferable within industry since it shows that company is well run and future consistent dividend increases are more likely. Dividend cuts in the past should be considered as red flags. Over time share price usually reflects dividend growth. So, check for consistency of price growth with dividend growth.


History of earnings per share (EPS) growth and its future projections allow to evaluate how sustainable will be dividend growth since dividends are paid out of earnings. Look for faster growth (double digit percentage growth year on year) in earnings per share for smaller companies and slower growth (single digit percentage) for larger ones. Earnings should grow faster or in line with company’s sales. Compare earnings growth with that of peers. Look for earnings growth in line or above that of other companies in the industry. Pay close attention to earnings dynamic in the latest quarters. Are earnings growing or falling? Look for anomalies in earnings figures and decide whether they repeat in the future.


Profit margin (PM) or net profits divided by sales, shows what part of sales are attributable to earnings. Look for companies with stable profit margin which is above that of other companies in its industry. Look for stable or uptrend development of profit margin in the latest quarters.


Return on equity (ROE) or net profit of company divided by shareholder equity, shows what return is achieved on shareholders’ money. Look for company with return on equity stable over time and higher than that of other companies in its sector. Also check that it is not down in the latest quarters.

Estimate of future performance

This is about collecting information from company’s financial reports, analysts’ researches, recent articles, etc.

Company can strengthen its business by introducing new products or services, expanding geographically, increasing prices, acquiring another company or in some other way. Evaluate what tools company would use to succeed in the future.

Do not forget to consider the long term prospects of the industry a company belongs to.

Price reasonableness

If you think it is a good company in terms of past performance and future expectations, then check how reasonable is its current stock price. On Stock Screen page make your estimates of future sales, earnings and dividend growth. Then stock price estimate is calculated automatically. So you can judge whether company is expensive or not with regard to its historical Price – to Earnings Ratio.

Stock price estimate is calculated as follows.

We evaluate what could be a stock price in the future and compare it with a current stock price. To make a stock price projection we use historical Price – to – Earnings ratio (P/E) of a stock.

Price of stock in 5 years is calculated as average P/E over the last 5 years multiplied by Earnings Per Share (EPS), expected in 5 years in the future.

Before investing, get confident that the company could succeed in the long term. Before you buy a stock, always write down the reasons WHY you decided to buy that particular stock.

The more efforts you put on picking the right stock, the less of a problem will be selling a stock.

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