July 2016 Q-Score Changes

In our last article, we discussed the volatility of Q-Scores and how every time we refresh our data each month, Q-Scores are likely to fluctuate. In observing larger fluctuations either up or down, we can then pinpoint exactly which data points caused the movement.

So where do we get our data from? Very simply, we use the spreadsheet produced by David Fish called “U.S. Dividend Champions” which is updated monthly. The only metric we need that is not on that spreadsheet is “International Sales” which we have put together ourselves with a combination of scraping the values from Yahoo or digging into the SEC filings ourselves.

Since David Fish has updated his spreadsheet for the month of August, we took a look at all the Q-Score changes in our 30 stock portfolio excluding our 3 REITs:

  • 13 stocks – No change in Q-Scores
  • 9 stocks – Change of 10 basis points or less (either direction)
  • 5 stocks – Change of 20 basis points of greater

We won’t investigate stocks with Q-Score changes of 10 basis points as these aren’t significant enough to merit looking at. Maybe over time there’s a trend here, but it will take a while for change at this pace to become meaningful. Instead, let’s look at the 5 stocks we hold with Q-Scores that changed by 20 basis points or more.

Medtronic (MDT): +230 basis points
Remember in our last article how we talked about “yield” being a very volatile component of the Q-Score? In this case, MDT had their yield increase from less than 1.5% all the way to almost 2% due to a dividend increase of 13.16% that was paid last month. Now the price has spiked recently and if this continues the dividend may fall right back to around 1.5%. We don’t have too many stocks in our portfolio (or universe for that matter) with dividends under 2% so this volatility is mostly a non-issue. 

3M (MMM): +80 basis points
We made a mistake when we initially calculated the Q-Score for MMM and had an incorrectly stated yield what was significantly lower then MMM’s actual yield. Consequently, the Q-Score has gone up this month. This did not affect our original industry stock selection exercise.

Linear Technology Corp (LLTC): -60 basis points
As we mentioned in a previous article, LLTC is soon to be acquired and consequently the stock price jumped about +25% in a single trading session. This increase in share price caused the LLTC yield to fall which contributed to a 70 basis point drop. This was offset by a 10 basis point reward for size which resulted from that same share price increase.

Franklin Resources (BEN): -20 basis points
This drop was solely attributed to a decrease in yield which appears to be a result of the share price increasing over the past month.

Exxon Mobil (XOM): +20 basis points
XOM saw their 20 basis point increase come solely from an increase in yield. This is most likely attributed to their recent drop in share price. Nothing but market noise here.

Each month going forward we can analyze the Q-Score changes for our 30 stocks and see what these changes say about the potential for future growth of our income streams.

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