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Revisiting Yield Channel Charts

Published Wed, 09 Dec 2020 09:00:00 -0500 on Seeking Alpha

Seeking AlphaDividend StrategyRevisiting Yield Channel ChartsDec. 9, 2020 9:00 AM ET|| Includes: GD, ITW, JNJ, MSFT, PG, TJXby: FerdiSFerdiS Dividend Growth Investing, portfolio strategy, long-term horizon, ValueDiv Gro.cls-1{fill:#024999;}SummaryFirst introduced in August 2017, Yield Channel Charts provide a way to assess market valuation relative to historical yield patterns.
We finally have a fully automated implementation using broker-grade data. We can easily create Yield Channels Charts and screen for undervalued or overvalued dividend growth stocks.
This article explains how we create and use Yield Channel Charts.
We demonstrate their practical application by analyzing one overvalued and one undervalued dividend growth stock.
This article was co-produced with James Marino Sr. of Portfolio Insight.
In August 2017, we introduced yield channel charts as a tool for dividend growth investors. These charts provide a visual representation of a stock's market valuation relative to historical yield patterns:

Source: This chart, and all charts in this article, unless otherwise noted, are courtesy of Portfolio Insight
We now have a robust, automated way to create yield channel charts. Our implementation uses the same broker-grade data platform that Dividend Radar is built on. The platform ingests and processes market data daily, including stock splits and dividend changes. All metrics such as average yields are calculated in real-time, so the yield channel charts and screening results are always up-to-date.
If a stock's price is within the yield channel, as is the case for the top-ranked Dividend Aristocrat Johnson & Johnson (JNJ) in the chart above, the stock is considered fairly valued relative to historical yields. Once the stock price moves outside the yield channel, the stock is either undervalued (below the channel) or overvalued (above the channel) relative to historical yields. We consider daily dividend yields over a 10-year time... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
JOHNSON & JOHNSON 130.43   21.6 6.03 3.80 2.93
ILLINOIS TOOL WORKS 159.85   21.5 7.45 4.28 2.54
PROCTER & GAMBLE 122.77   90.3 1.36 2.98 2.49
GENERAL DYNAMICS 189.41   16.8 11.25 4.08 2.17
TJX 56.75   22.9 2.48 0.92 1.62
MICROSOFT 137.52   27.1 5.07 1.84 1.35


Older articles featuring Johnson & Johnson (JNJ):
Johnson & Johnson: A Top Dividend Stock for 2021 & Beyond
Roche Is A Suitable Addition To Diversified Dividend Growth Portfolios
31 December Dividend Stocks Billionaires Hold
Nicholas Ward's Dividend Growth Portfolio: November 2020 Review
Dividend Champion And Contender Highlights: Week Of December 6
Johnson & Johnson: 3 Reasons to Check Out This Dividend Giant Now
All Weather Dividends: 10 Value Buys And 5 Overvalued Sells To End 2020
Of 56 Kiplinger Outstanding Dividend Stocks, 11 Show Sweetness For December
Vanguard High Dividend Yield ETF: Rotation From Growth Into Value Stocks Should Boost Investor Appetite For This ETF
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