No. of Recommendations: 13
I created a gtr1 backtest of a screen similar to SCHD. This is a way of testing the backtester (a good backtester should be able to reproduce the results of an ETF), as well as a way to better understand how the ETF works. I was particularly interested in seeing how free-cash-flow-to-total-debt ratio affected results. free-cash-flow-to-total-debt increases the CAGR of this screen by about 1%, and so might be worth considering for other screens.
SCHD picks stocks that have paid dividends for a minimum of 10 consecutive years, and ranks stocks by free-cash-flow-to-total-debt ratio, return on equity, dividend yield, and five-year dividend growth. SCHD applies liquidity and market cap limits, and uses Market cap weighting. SCHD follows the Dow Jones U.S. Dividend 100 Index, rebalances quarterly, and drops zero Yield stocks monthly.
https://www.spglobal.com/spdji/en/documents/method...Index backtest results: 11.8% CAGR from June 30, 2001 to June 30, 2021. 15-year MDD -45%. The index reconstitutes annually in March. No single stock can represent more than 4.0% of the index.
https://www.spglobal.com/spdji/en/documents/educat...The screen {nearzSCHD2023a} results: 12.1% CAGR from June 30, 2001 to June 30, 2021. 15-year MDD -47%.
Screen CAGR SAWR GSD DIGSD LDD LDDD3 MDD UI Sharpe Beta TI AT
ticker_SCHD 13.1 11.0 15.6 18.2 10.0 5.3 -33 4.0 0.89 0.87 14.5 0.14
nearzSCHD2023a 13.6 11.4 17.9 21.3 11.7 5.7 -38 4.7 0.83 1.01 13.2 0.52
.... nearzSCHD2023a
year Avg Min Max SCHD
2012 10 7 11 11%
2013 28 26 30 33%
2014 12 10 15 12%
2015 1 -1 4 0%
2016 18 17 20 16%
2017 26 25 27 21%
2018 -1 -3 0 -6%
2019 33 31 34 27%
2020 22 13 28 15%
2021 34 31 42 30%
2022 -10 -16 -7 -3%
step0: [Security Type] == 10,11,12,30,31
step1: [Mkt Days Since Security Opened] >= 253
step2: [Average dollar-volume over 63 days] Top 63%
step3: [MktCap] Top 85%
step4: [Yield] Top 50%
step5: quarterly report filed recently
step6: no recent mergers
step7: paid dividends for 9 years
step8: [Yield] > 0
step9: [Equity] > 0
step10: [rAll] Top 200
step11: [capMC] > 0
step12: [rAll] Top 200
step13: [rAll] Top 100; Cash When None
Holding period = 63 mkt days
Hold while passing step12
Frictional loss of 0.4% applied to all sales (closing long/opening short)
Weight liquid positions by [capMC] every holding period
[rAll]: [rROE] + [rYield] + [rDivGro] + [rFCFtoDebt]
[topMC]: [Top 15% Cut-Off by [MktCap] at step11]
[capMC]: [Min([MktCap], [topMC])]
https://gtr1.net/2013/?~nearzSCHD2023a:h63f0.4::st...Varying the weight given to free-cash-flow-to-total-debt from -10 to 10 shows a weight of 1 is close to the best, with CAGR about 1% higher than zero weight.
CAGR is similar with different weightings: CAGR 13.0 market cap, 13.3 with cap, 13.8 equal weight. Equal weight is the best from 19911122, but is the worst from 20111020.
