The Cambria ETF Trust and its investment manager, Cambria Investment Management, LP, saw the lauch of the Cambria Shareholder Yield ETF (SYLD) today. This new offering will be an actively managed trust with “shareholder yield” at the forefront of both the funds’ algorithm and management team. “Shareholder yield” is generally comprised of companies that exhibit the following three characteristics: high cash dividends, actively engaging in share buybacks, and companies that are willing to pay down their debt.
With the proliferation of ETF’s of all shapes and colors, many believe that there is no room for a fund to think differently. Cambria with its Shareholder Yield ETF is out to prove the naysayers wrong with SYLD, and hopes that investors agree when they see their annual dividend check. For Cambria’s part they plan to charge investors 59 basis points a year in fees for exposure.
Research conducted over the last year has shown that portfolios of companies with high shareholder yields outperform broad markets by a substantial margin. They also outperform high dividend yield portfolios as well, and this approach could pave the way for how portfolios are chosen in this present market environment.
Cambria’s Shareholder Yield ETF
The Shareholder Yield ETF’s portfolio will be comprised of 100 U.S stocks that have a market capitalization over 200 million, and meet the “shareholder yield” structure outlined above. The companies chosen will also range in size, industry and sector, and will be managed to ensure that no one sector is over concentrated.
“Investors continue to search for income, but they should be wary of a narrow focus on dividends,” said Mebane Faber, Cambria’s Chief Investment Officer and author of The Ivy Portfolio. “Historically, assessing stocks based on their collective shareholder yield is a strategy that has outperformed vanilla dividend investing. Based on research published in our book, Shareholder Yield: A Better Approach to Dividend Investing, we believe investors need to look further than dividends when identifying companies with strong free cash flow characteristics.”
Eric Richardson, Cambria’s chief executive officer, continued with Mr. Faber’s remarks by saying, “SYLD, in selecting a portfolio based on the three shareholder yield factors of dividend payments, share buybacks and debt reduction, is the first ETF of its kind. While the high yield ETF space has become crowded, we hope SYLD will disrupt the market and open the eyes of investors to a more holistic approach to income investing. We expect to launch additional funds in the actively managed alternatives space in the coming months.”
It’s difficult, given the innovative yield strategy laid out, to find direct competition to this fund. While only the second ETF offered by Cambria, the above comments suggest it won’t be the last and that Cambria has a few more innovative approaches to managed funds under its belt.