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Samuel Smith: Hi. My name is Samuel Smith. I run the Investing Group, High Yield Investor that you can find right here on Seeking Alpha. In today’s video, I’m going to share with you, how I use some of Seeking Alpha’s features to research stocks and ETFs and find the best ones to invest in, on my service High Yield Investor.

So here’s a stock that is popular with a lot of investors on Seeking Alpha, Ares Capital Corporation. So, I’m an income focused investor. So one of the things I’m most focused on this page of a security is the dividend yield. And so I see the 8.56% dividend yield. And those FWD, that I like that one, it has that – that’s forward looking dividend. It’s based on the most recent declared dividend, so it’s an attractive yield and I like that a lot.

So then I can look into other features, for example, the Valuation tab, and that’s one that I like, because I can compare it quite easily, with its own history and with peers. So for BDCs, one of the most common valuation metrics is the book value. And so, because the book value of the underlying assets are quite accurate, determined through both third-party and the company’s own internal assessment of the private market value of the investment portfolio that ARCC holds. And so you can see here it trades at a 1.13x its underlying book value, which means you’re basically paying a 13% premium to the private market value of the underlying holdings when you buy shares in ARCC.

And you can see that, compared to peers, it trades at an 11.73% discount because the peers sector medium trades at a 1.28% premium – 1.28x premium, 28% premium. And then, but ARCC’s five year average valuation is 1.06x. So you can see that, it currently trades at a 6.2% premium to its five year average. So that indicates that ARCC is perhaps expensive relative to its own history, but cheap relative to peers.

Now, of course, when comparing to peers and its own history, you have to look at underlying qualitative factors are – who are the peers it’s being compared against, what are their qualitative factors, and then also how has ARCC’s qualitative factor changed over time. So, of course, you need to do further investigation, but that is a quick – once over that gives me an initial picture of there’s a potential for it being undervalued or not.

Also, you can look at the dividend yield to see the same thing. You can see that. Well, I don’t think this is accurate because I don’t know of any BDCs that have dividend yields that low, so I don’t know where they’re getting that peer number from. But in terms of its own dividend yield, you can see here that, it trades fairly close to, but at its yield is a little bit lower than its five year average, which kind of goes along with the fact that its book value is at a premium. Both of these seem to indicate that ARCC is a little bit expensive right now relative to its history.

Now we can look at something else here to compare it more with its peers. You can see price return. I prefer total return, especially, with a stock like a BDC that the large part of its total return comes from. The dividend, you compare it over many years to see how ARCC has done over time. So, for example, if you look at its long-term, you see really high total returns since it went public earlier, a little over 20 years ago. That’s a really good return for 20 years. So, ARCC is definitely a good long-term compounder.

And you can compare with peers on other metrics like, dividend frequency, dividend growth, rates, etc., and its performance over time. So it’s just a nice way to do a comparison with sector peers to get an idea of, if the stock is high quality, if it has a good track record, and if it’s undervalued at the moment.

Now here’s how I also evaluate popular funds, like, for example, the Schwab U.S. Dividend Equity ETF is a very popular dividend growth ETF. So in this page, I really like that they list the expense ratio right off the bat. It gives you a good idea of, is the fund high price or low price. Well, SCHD looks very low price, so that I like a lot. You can get a sense for the dividend yield here as well.

Then you can compare on some other metrics, for example, you can look at the holdings, and this is important because it tells you how diversified the fund is. And so I can see what sectors it has a lot of exposure to and which ones it doesn’t. So if I’m building my portfolio around SCHD, maybe I want to supplement it with some stocks or even ETFs that are more heavy in these sectors since it’s lighter in those sectors, and I don’t need to supplement as much in these sectors.

And then, the top holdings, it shows it has a 103 total holdings, so pretty good diversification, but over 40% of the portfolio is in the top 10 alone. That tells me it’s a very concentrated fund. I need to understand and feel good about these top 10 holdings if I’m going to want buy SCHD. Of course, you can click right on these links to go analyze those stocks right away, which is nice.

What else here that I like to look at? The ratings. This gives you a quick once over of how the fund compares. So Quant looks at momentum, expenses, dividends, risk, and liquidity. So the overall Quant rating is quite low, and the reason for that is - a big part of that is SCHD has very bad momentum. And the Quant puts a high emphasis on momentum, and that’s kind of how they determine risk too in some respects. And so you can see that over the past three months, it’s performed very poorly compared to the market. And in general, so it’s a D rating for momentum.

However, if all you care about is a low fund expense ratio and a really good yield plus growth profile, SCHD is arguably as good as it gets because it’s an A+ plus rating for both expense ratios. So it’s very cheap, and it has a phenomenal dividend track record. So I like that a lot.

You can see more about the dividend score here broken down. In addition to it having, an attractive yield of 3.71% on a trailing 12 month basis, that’s very attractive relative to other funds, like it, and has a 13 year dividend growth streak, which is phenomenal, gets it an A+. It’s grown its dividend at a very consistently high pace over the past 12 months, three years, five years, and 10 years. And so it’s a phenomenal dividend growth machine.

And finally, here you can compare it to its peers to get a sense of it. So you can see its expense ratio is among the very best in the sector. You can see its total price return. You can see its total return over the long-term here compared to some of its peers, is quite good. So it’s a pretty good long-term compounder even if recently it hasn’t performed very well. You can see the comparing of the Quant ratings of the different ones in the sector as well as Seeking Alpha analyst rating in aggregate.

And then you could see that the grade breakdown here as well. See, all these have good expense ratios. DVY is not as good. On the dividends, SCHD and VIG are the best. You can see the momentum scores, the risk scores, and liquidity scores, to make your pick. Again, I only put so much stock into those, but the dividend score and the expense score too, I probably put the most emphasis on.

Then you could see the dividend growth track record. So who has the best five year dividend growth track record? Looks like SCHD does. Who has the best three year dividend growth track record? Well, it looks like DGRO edges them out, but SCHD has the higher dividend yield. And so you can just kind of get a sense for all that. You can see how frequently they pay out dividends. How many years in a row they’ve done the – grown the dividend for, etc. And then also here’s the performance breakdown to let you know.

So, again, these are all useful tools to get a quick once over of a fund or a stock to get a sense of where it’s strong, where it’s weak compared to peers. And if you see anything weird that sticks out or something that you want more explanation for, it helps you to target your deeper dive due diligence to learn more about the company, whether that’s earnings calls, investor presentations, reading articles on Seeking Alpha, or even some other tools on other websites.

I like using Seeking Alpha data to just give me a quick overview and a sense of the stock to see if it’s even worth pursuing more and where I should focus my research.

So, hopefully, that was useful for you, gave you some insights into how you can better use Seeking Alpha to research stocks and ETFs and also some insights behind the curtain to how I research them. Of course this is just a small section of it. I use a lot of tools and do a lot of research on my own. And again, please don’t forget to check out my service, High Yield Investor. There’s a link below. You can become more familiar with my work on my profile in Seeking Alpha at Samuel Smith. Thank you very much.

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