Why ‘Shareholder Yield’ Beats ‘Dividend Yield’ by Meb Faber
Guest: Episode #12 has no guest, but is co-hosted by Meb’s co-worker, Jeff Remsburg.
Date: 8/5/16
Run-Time: 36:38
Topics: If you’re a dividend investor, Episode 12 is for you. Yes, historical market data tells us that dividend stocks outperform the broad market. But that’s where too many investors stop. That same historical market data suggests we can improve our dividend-strategy returns—significantly—by a few tweaks. What are they? Well, paying dividends is just one of several ways that corporate managers can return profits to shareholders. They can also buy back stock and pay down debt (a subtler form, but valuable nonetheless). Together, we call these three returns “shareholder yield.” Shareholder yield provides investors a more holistic perspective on the degree to which corporate managers are sharing profits with investors. So when an investor limits his or her analysis simply to dividends, he/she runs the risk of overlooking companies that might be returning major profits to shareholders—but in less visible ways than dividends. That’s a problem because it turns out, when we combine these three yields, this “shareholder yield” strategy has posted better historical returns than dividends alone. How much better? Find out in Episode 12.
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Links from the Episode:
- Shareholder Yield – Meb Faber
- How to look up fund valuations on Morningstar
- The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success– Thorndike
- “The High Dividend Return Advantage” – Tweedy Browne
- 2011 Global Investment Returns Yearbook
- “The Importance of Dividend Yields in Country Selection” – Michael Keppler
- “Dividends, Share Repurchases, and the Substitution Hypothesis” – Grullon and Michaely
- “Disappearing Dividends: Changing Firm Characteristics or Lower Propensity to Pay?” – French Fama
- “Taxation, Dividends and Share Repurchases: Taking Evidence Global,”—Jacob and Jacob
- “The Importance of Dividends and Buybacks Ratios for Gauging Equity Values” and “When Will Apple and Google Start Paying Dividends” – Jeremy Schwartz
- “Share Repurchase From All Angles” – Michael Mauboussin
- What Works on Wall Street – James O’Shaughnessy
- “Enhancing the Investment Performance of Yield-Based Strategies” – Gray and Vogel
- “The Dividend Challenge” – Faber
- “What You Don’t Want to Hear About Dividend Stocks” – Faber
- “The Case for Global Dividends” – OSAM
- “Buybacks Beat the Market” – Hulbert
- Here is a discussion summarizing Buffett’s thoughts on dividends in his 2012 letter to shareholders
- “When Measures Become Targets: How Index Investing Changes Indexes” – OSAM
- “Will Dividends go the way of the Dinosaur?” – Skinner
- Free Cash Flow and Shareholder Yield – William Priest
- “On the Importance of Measuring Payout Yield: Implications for Empirical Asset Pricing” Griffin
- “Asset Growth and the Cross-Section of Stock Returns” – Schill, Gulen, and Cooper
- “How Tax Efficient are Equity Styles?” – Israel and Moskowitz
Read the transcript here.