By Marco Bozem of MB Capital Strategies Global
Most dividend growth screens use the same first filter: a payout ratio below some threshold—60%, 75%, whatever the model prefers. It works well for the sectors most DGI portfolios are built around: consumer staples, utilities, and healthcare.
Steady earnings, steady payout, steady ratio.
It breaks down completely once you move into cyclical hard-asset sectors—shipping, mining, and upstream energy. I hold real positions in all three sectors, and the payout ratio has often misled me, so I stopped screening by it.
Here’s why, and what I check instead.