Methodology
How we build and review portfolio content
This page explains how Squirrel Stocks turns raw market inputs into user-facing calculations and educational content. It covers metric formulas, portfolio health scoring, data sources, and the review process used for all public educational pages.
Metric formulas and calculation rules
Every metric displayed in Squirrel Stocks follows a documented formula. The table below lists the core metrics, the formula used, and any important caveats.
Dividend yield
Formula: Annual dividend per share ÷ current share price × 100
Squirrel Stocks uses trailing twelve-month (TTM) dividend data where available. Forward estimates are labelled separately when displayed.
Payout ratio
Formula: Dividends paid ÷ earnings (net income) × 100
For REITs and some income trusts, funds from operations (FFO) is a more appropriate denominator. Where FFO data is available it is used in place of net income.
Dividend coverage
Formula: Earnings per share ÷ dividend per share
Equivalent to the inverse of the payout ratio when using the same earnings base. Coverage above 1.5× is considered adequate; above 2× is considered comfortable.
Yield on cost
Formula: Annual dividend per share ÷ average cost per share × 100
Uses the user's recorded average cost basis, not the current market price. This metric rewards long-term holding in dividend growers.
Portfolio value
Formula: Shares held × current price, converted to portfolio currency
Current prices are fetched from external market data feeds and may be delayed by up to 15–20 minutes. Exchange rates are applied using the portfolio's selected base currency.
Unrealised gain
Formula: Current portfolio value − total cost basis
Cost basis is calculated from recorded buy transactions. Sold shares reduce the cost basis using a weighted average cost method.
Annual dividend income
Formula: Sum of all dividend payments received in the trailing 12 months
Converted to the user's base currency using exchange rates at the time the calculation is run. Estimated future dividends are shown separately and labelled as estimates.
Portfolio health score
The portfolio health score is a weighted composite that gives you a single number (0–100) to summarise overall portfolio quality. It does not predict returns. It is designed to highlight structural risks — concentration, lack of diversification, stretched dividends — that are worth addressing regardless of short-term performance.
The score is calculated across four weighted dimensions:
- Concentration — Measures how evenly value is spread across holdings. A portfolio where a single stock represents more than 30–40% of total value scores lower on concentration. The metric uses a Herfindahl-style index so that five holdings of 20% each score better than one at 80% and four at 5%.
- Sector diversification — Checks how many distinct sectors are represented and whether any single sector dominates. The score rewards portfolios that are spread across at least four sectors with no sector exceeding 40% of total value.
- Dividend safety — Aggregates payout ratios and dividend coverage across holdings weighted by their share of total dividend income. Holdings with a payout ratio above 90% or coverage below 1.1x drag the score down. Holdings with no dividend data are treated neutrally.
- Dividend coverage — Similar to dividend safety but focused purely on the earnings-to-dividend relationship (EPS / DPS). Coverage above 2x is considered healthy. The portfolio-level metric is an income-weighted average across all holdings that pay a dividend.
Weights are adjusted based on the user's investor persona. An income-focused Fortress Builder persona weights dividend safety and coverage more heavily than a Strategist persona, which weights sector and stock concentration more heavily.
Investor maturity scoring
Alongside the portfolio health score, Squirrel Stocks tracks an investor maturity score (0–100) that reflects platform engagement and portfolio complexity. It is intended as a coaching signal, not a performance measure. Points accumulate for actions like setting income goals, adding diversification targets, reviewing reports, and maintaining a watchlist. The score adapts as usage changes.
Data handling
Portfolio calculations depend on user-entered holdings and external market data feeds. External sources can be delayed or revised, so values shown in the app may not match real-time quotes.
We treat data integrity as a product concern: errors are logged, calculation paths are reviewed, and edge cases are corrected when mismatches are discovered.
Known data limitations
- Market data (prices, dividends, financials) is sourced from third-party providers and may be delayed, incomplete, or subject to revision after publication.
- Dividend history older than approximately five years may be unavailable or incomplete for some securities.
- Financial ratios (payout ratio, coverage, P/E) are based on trailing twelve-month figures unless labelled otherwise.
- Exchange rates are updated periodically and may not reflect real-time mid-market rates.
- Estimated dividend payments are model projections and are not guaranteed.
- Data for smaller or less-liquid securities may be less complete than for large-cap stocks.
Content review process
Every public educational update is checked against product behavior before release. If a component changes, related explanations are revised so documentation does not drift from what the platform actually does.
- Does the explanation match what the product actually does today?
- Are assumptions and data limits clearly stated?
- Would a first-time investor understand the takeaway?
- Is the content original and specific to Squirrel Stocks workflows?
What this methodology is not
This page explains product and content standards. It is not investment advice, and it does not predict returns or guarantee any strategy outcome. All metrics and scores are tools for self-directed portfolio review, not professional recommendations.
Report an issue
If you find a calculation mismatch, outdated explanation, or unclear documentation, email contactus@squirrelstocks.co.uk so we can review and correct it.