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Refining Risk Measurement Of Dividend Stocks
By: Dividends4Life   Tuesday, December 30, 2008 9:35 AM
Symbols: CTL, ED, HCP, INTC, JNJ, KMB, KO, LLY, MCD, MDCO, NUE, PEP, PFE, SYY, UTX, WMT, WTNY

Again, the predetermined levels are purely arbitrary and subject to future calibration.

Putting It All Together
My Risk Rating is calculated by averaging the four numeric values above, as such:

(R + Q +P +Y)/4 = Risk Rating

This calculation will yield values between 1 and 3. I divided this range into thirds and assigned an overall rating based on this table:
  • 1.00 to < 67 ="">
  • 1.67 to < 34 ="">
  • 2.34 to 3.00 = High
Snapshot Of My Dividend Stock Holdings
Currently, I am holding 35 dividend stocks (excluding ETFs and CEFs). Of which three are rated as high risk:

CenturyTel Inc. (CTL)
CenturyTel Inc. provides a range of telephone services in 25 states, with operations concentrated in Alabama, Arkansas, Louisiana, Missouri and Wisconsin.
Using the above formula (R + Q +P +Y)/4 = Risk Rating: (2 + 2 + 3 + 3)/4 = 2.50

Pfizer Inc. (PFE)
Pfizer, Inc. engages in the discovery, development, manufacture, and marketing of prescription medicines for humans and animals in the United States, Europe, Canada, Asia, and Latin America.
Using the above formula (R + Q +P +Y)/4 = Risk Rating: (2 + 3 + 3 + 2)/4 = 2.50

Health Care Property Investors Inc. (HCP)
Health Care Property Investors, Inc. operates as a real estate investment trust in the United States. The company, through its subsidiaries and joint ventures, invests in health care-related properties and provides mortgage financing on health care facilities.
Using the above formula (R + Q +P +Y)/4 = Risk Rating: (2 + 3 + 3 + 2)/4 = 2.50

17 of my dividend stock holdings are rated as medium risk. Some familiar stocks include:

Intel Corporation (INTC)
Intel Corporation engages in the manufacture and sale of semiconductor chips, as well as in the development of advanced integrated digital technology platforms for the computing and communications industries worldwide.
Using the above formula (R + Q +P +Y)/4 = Risk Rating: (2 + 3 + 3 + 1)/4 = 2.25

Eli Lilly and Co. (LLY)
Eli Lilly and Company discovers, develops, manufactures and sells prescription drugs that offers a wide range of treatments for neurological disorders, diabetes, cancer, and other conditions. The company also sells animal health products.
Using the above formula (R + Q +P +Y)/4 = Risk Rating: (2 + 3 + 2 + 2)/4 = 2.25

Nucor Corp. (NUE)
Nucor Corporation is engaged in the manufacture and sale of steel and steel products. As the largest minimill steelmaker in the U.S., Nucor has one of the most diverse product lines of any steelmaker in the Americas.
Using the above formula (R + Q +P +Y)/4 = Risk Rating: (1 + 3 + 3 + 1)/4 = 2.00

McDonald's Corp. (MCD)
McDonald's Corporation primarily franchises and operates McDonald's restaurants in the food service industry. These restaurants serve a varied, yet limited, value-priced menu in more than 100 countries around the world.
Using the above formula (R + Q +P +Y)/4 = Risk Rating: (2 + 2 + 3 + 1)/4 = 2.00

Consolidated Edison, Inc.


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