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  • Writer's pictureJay Coulter, CFP®, CIMA®

SYLD - Cambria Shareholder Yield ETF

Shareholder yield is a financial metric that measures how much cash a company returns to its shareholders through dividends and stock buybacks. It is an important metric for investors who are looking for companies that provide a high return on investment.

Traditionally, investors have focused on dividend yield as a measure of shareholder return. Dividend yield measures the dividend paid by a company as a percentage of its stock price. While dividend yield is a useful measure, it does not provide a complete picture of the cash returns a company provides to its shareholders.

Shareholder yield includes both dividends and share buybacks, which makes it a more comprehensive measure of shareholder return. Share buybacks involve a company buying its own shares in the open market. This reduces the number of outstanding shares, which increases the value of each remaining share.

When a company has excess cash, it can either pay dividends to its shareholders or use the cash to buy back its own shares. Both options provide cash returns to shareholders, but they have different implications for the company's financial health.

Dividends are a sign that a company is financially stable and has a predictable stream of cash flow. Companies that pay dividends tend to be more established and have a history of profitability. On the other hand, share buybacks can be a sign that a company does not have any attractive investment opportunities and is returning cash to its shareholders as a last resort.

In recent years, share buybacks have become more popular than dividends. This is because buybacks are more flexible than dividends. Companies can buy back shares when they have excess cash and stop buybacks when cash is tight. In contrast, cutting dividends can send a negative signal to investors and lead to a drop in the company's stock price.

To calculate shareholder yield, we add the dividend yield and the net buyback yield. The net buyback yield is the amount of cash returned to shareholders through share buybacks as a percentage of the company's market capitalization.

For example, if a company has a market capitalization of $1 billion and it buys back $100 million worth of shares, the net buyback yield is 10%. If the company also pays a dividend of $20 million, the total shareholder yield is 12% (10% net buyback yield + 2% dividend yield).

Let's look at SYLD from Cambia.

From their Website:

The Cambria Shareholder Yield ETF utilizes a quantitative approach to invest in US equities with high cash distribution characteristics. The initial screening universe includes stocks in the United States with marketing capitalizations over $200 million. The ETF is comprised of the 100 companies with the best combined rank of dividend payments and net stock buybacks, which are the key components of shareholder yield. The ETF also screens for value and quality factors, including low financial leverage.

Fund Website: Link


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