Growth Stock or Income Stock? How Prospyr's Stock Fit Score Answers It per Holding

Two Canadian holdings can sit side by side in the same portfolio and be doing completely different jobs. A bank stock yielding 4.80% with a flat share price is not competing with a growth-focused industrial name that pays 1.20% and has doubled in three years — they are not even playing the same game. Most portfolio tools ignore this distinction and score every holding on the same scale.

Prospyr's Stock Fit Score does not do that. It asks a narrower, more useful question for each individual holding: is this position built to produce income, built to grow, or built to do a bit of both? The answer changes what "good performance" even means for that specific line in your portfolio.

This post explains the mechanics behind the score — the inputs, the math, and why the label attached to one holding can look completely different from the label attached to another in the same account.

The problem: one performance number hides two different jobs

An Ontario investor holds two positions in a $60,000 TFSA: 200 shares of a Canadian bank stock and 150 shares of a smaller industrials name with no dividend history.

The bank stock pays a 4.60% yield, has a 10-year dividend growth streak, and its share price has moved less than 15% in either direction over three years. The industrials name pays no dividend, and its share price has moved 40% in the same window — up in some years, down in others.

If both positions are judged only on total return, the industrials name might look like the "better" holding in a strong year. But that comparison ignores what each position was bought to do. The bank stock was never meant to compound share price aggressively — its job is dependable, growing income. The industrials name was never meant to pay a stable dividend — its job is capital appreciation.

Without a framework that separates these roles, an investor can end up chasing price movement out of a holding that was doing exactly what it was supposed to do, or holding onto a growth position waiting for income it was never designed to produce.

How the Stock Fit Score assigns a role

The Stock Fit Score evaluates each holding independently across three lenses — Growth fit, Income fit, and Balanced fit — and returns the label that scores highest for that specific position.

The inputs behind each fit label

Four inputs drive the score for a given holding:

• Current dividend yield — the income the position produces today, relative to its price
• Dividend growth rate (DGR) — how consistently and quickly that income has grown historically
• Payout ratio — how much of earnings is distributed versus retained for reinvestment
• Price volatility — how much the share price has moved historically, independent of the dividend

A high current yield combined with a high payout ratio and low price volatility pushes a holding toward an Income fit label. A low or zero yield combined with a low payout ratio and higher price volatility pushes it toward a Growth fit label. A holding that sits between both — a moderate yield with room to grow and a moderate payout ratio — lands in Balanced fit.

A worked example

Take the two Ontario holdings above:

Bank stock: 4.60% yield, 65% payout ratio, 6% five-year DGR, 12% annualized price volatility. High yield, high payout ratio, low volatility — this scores toward Income fit.

Industrials name: 0% yield, 0% payout ratio, no DGR data, 34% annualized price volatility. No income component and high volatility — this scores toward Growth fit.

Neither score is a judgment on quality. It is a description of the job each holding is doing inside the portfolio right now, based on its own numbers — not the numbers of the position next to it.

A third holding: what Balanced fit looks like

A third position rounds out the picture. Suppose the same investor also holds a Canadian REIT paying a 3.40% yield, a 45% payout ratio (measured against funds from operations rather than net earnings, as is standard for REITs), a 3% five-year distribution growth rate, and 20% annualized price volatility — sitting between the bank stock and the industrials name on every input.

This position does not score strongly toward either extreme. Its yield is meaningful but well below the bank stock's, its payout ratio leaves room for both distribution growth and reinvestment, and its volatility sits above the bank stock but well below the industrials name. This is the profile the score labels Balanced fit — a holding doing some of each job rather than specializing in one.

Mode switching changes what "fit" means, not the data

The Stock Fit Score can be viewed in three modes: Growth, Income, and Balanced. Switching modes does not change the underlying yield, payout ratio, or volatility data for any holding — it changes which lens is used to interpret that data, so the same bank stock holding can display a strong fit badge in Income mode and a weaker fit badge in Growth mode, without any of its inputs changing.

This distinction matters when reviewing a full portfolio rather than one holding. A twelve-holding portfolio viewed in Income mode might show nine strong-fit badges and three weak-fit badges — the three weak badges are not necessarily bad holdings, they may simply be growth-oriented positions the investor added deliberately for a different reason. Viewed in Growth mode, those same three holdings would likely flip to strong-fit badges, while several of the nine income-strong holdings would flip to weak-fit. The badge is describing alignment with the selected lens, not ranking holding quality in absolute terms.

Where this differs from a portfolio-level strategy decision

It is worth being explicit about what the Stock Fit Score is not. It does not tell an investor whether now is the right time to convert a growth-oriented portfolio into an income-oriented one, and it does not weigh tax cost, timeline, or account type — that is a separate, portfolio-level decision with its own framework. The Stock Fit Score operates one level down: given the holdings already in the portfolio today, what job is each one doing right now. Confusing the two can lead to treating a single Growth-fit badge as a signal to sell, when the correct read may simply be that the holding is doing its job well.

Using the Portfolio Conversion Tool alongside the score

The Portfolio Conversion Tool is useful once the Stock Fit Score has told you which holdings are doing an income job and which are doing a growth job. If several holdings are scoring as Growth fit but your actual need is income within the next few years, the tool models what converting those specific positions into income-generating holdings would cost in tax and produce in yield — using your real numbers rather than a generic assumption.

The Stock Fit Score answers "what is this holding doing right now." The Portfolio Conversion Tool answers "what would it cost to change that." They are two different questions, and neither replaces the other.

Takeaway

A single performance number cannot tell you whether a holding is succeeding, because different holdings in the same portfolio are often built for different jobs. The Stock Fit Score separates that question per holding using yield, payout ratio, dividend growth rate, and price volatility — not price movement alone. A bank stock with a flat share price and a 4.60% yield is not underperforming; it may be doing exactly the income job it was bought to do. Before deciding a holding needs to change, check what job the score says it is already doing.