Joel Greenblatt Magic Formula Dividend Screen November 2017

I like to run a screen based on Joel Greenblatt’s Magic Formula with a dividend twist.

Like the book, I remove all financials.

I set the minimum market capitalization to $500 million

Only companies listed on a major U.S. stock exchange.

I set the minimum dividend yield at 1%.

Finding New Dividend Payers

I don’t run this screen to find the highest yielding stocks. It has been a decent screen to find new dividend payers.

Our definition of a New Dividend Payer is a company that started paying a dividend within the last 5 years.

The magic formula selects for companies that generate high returns on invested capital. A New Dividend Payer with a high ROIC generates excess capital to continue to grow their dividend.

Like the book. I ranked each company based on their cheapness and their ROIC. Below is the top decile of companies based on the rankings.

Magic Formula Investing Screen
Top Decile of Ranked Stocks

Download the whole spreadsheet.

Coffee & Pizza

A couple interesting names pop out, Starbucks (SBUX) and Papa John’s International (PZZA). I recently did some valuation work for the two companies.

I valued Starbuck’s using a discounted economic profit model. With Papa John’s I did a brief back of the napkin valuation to see what I price I would pay per share to generate 20+% returns.

Further Reading

The Little Book That Still Beats the Market by Joel Greenblatt

What I Wish I Wrote ~ November 25, 2016

A collection of mostly investment related links that I wish I had the talent to create.

aircraft technology
View full infographic at Visual Capitalist

The Future of Military Technology is Intense (Visual Capitalist)

Is Starbuck’s (SBUX) on its way to becoming a dividend aristocrat? (Dividend Growth Investor)

Notes from Warren Buffett’s meeting with MBA students at the U. Of Maryland. (ValueWalk)

Joel Greenblatt on Consuelo’s Mack’s WealthTrack. (YouTube)

Or read the full transcript of the interview. (Hurricane Capital)

Does CBRE Group have an emerging moat? (Punchcard Research)

A list of fintwit accounts to follow. (Sentieo)

Learn the art of value investing from 6 super investors: Howard marks, Tom Russo, Guy Spier, Monish Pabrai, Rupal Bhansali, Arnold Van Den Berg. Free course on Udemy. (Udemy)

Why moats are essential to profitability (Restaurant Edition). (25IQ)

Novo Nordisk, What Now? (Value and Opportunity)