Shareholder Yield Screen
Combine dividends and net buybacks to measure cash returned to shareholders
- Difficulty
- Moderate
- Time to result
- ~months to results
- Steps
- 6
- Confidence
- 99%
Shareholder yield evaluates the total cash a company returns through dividends and net share repurchases. A dividend is a direct payment, while a buyback reduces the share count so each remaining share represents a larger ownership percentage and more earnings per share. The calculation must be net of new issuance: a company paying a dividend while issuing even more stock may deliver a negative overall yield through dilution. Investors therefore measure dividend yield, add buyback yield, subtract issuance, and rank companies on the combined result rather than either component alone. Faber's implementation holds a broad basket and rebalances quarterly, balancing enough concentration to differ from a market-cap benchmark with diversification across sectors and companies.
Origin
Faber said Cambria had researched shareholder yield since 2006 and launched funds after finding no comparable low-cost product.
Core principles
- 01Dividends and buybacks are economically related payouts
- 02New share issuance can offset a dividend
- 03Net cash distribution matters more than either component alone
- 04Broad portfolios reduce company-specific risk
How to run it
- 1
Measure dividends
Calculate the cash dividend yield paid to shareholders.
Watch out Do not treat the dividend as the company's complete payout.
- 2
Measure repurchases
Calculate the value of shares the company bought back relative to its market value.
- 3
Account for issuance
Subtract newly issued shares so dilution does not masquerade as shareholder return.
Pro tip Focus on the change in net share count.
Watch out A dividend payer can still produce a negative shareholder yield.
- 4
Combine the payouts
Add dividend yield and net buyback yield to calculate total shareholder yield.
Pro tip Use the same measurement period for every component.
- 5
Build a broad portfolio
Select high-ranking companies while maintaining diversification across sectors and names.
Pro tip Use enough holdings to limit damage from one company while retaining differentiation.
- 6
Rebalance periodically
Refresh the screen and holdings on a fixed schedule such as quarterly.
Watch out Factors move in and out of favor, so avoid judging the method by a short period.
In the wild
Faber describes a company paying a two or three percent dividend while issuing three or four percent a year in new stock. Once issuance is included, the investor receives a negative total yield rather than the attractive payout suggested by the dividend alone.
→ The combined screen rejects a misleading dividend signal.
Faber uses Apple as an example of a company with a dividend yield plus an additional buyback yield. The shareholder-yield view captures both forms of cash distribution.
→ The investor evaluates Apple's full payout rather than only its dividend.
Common mistakes
Looking only at dividends
Dividend yield misses the effect of repurchases and can conceal dilution from new issuance.
Looking only at buybacks
Faber calls either component alone the same mistake because investors care about total cash returned.
Chasing a factor after it gets expensive
Factors move in and out of favor; dividend stocks struggled after investor demand pushed them to expensive valuations.
Is it for you?
Best for
Equity investors screening profitable companies by distributions to shareholders.
Not ideal for
Investors who want to judge companies solely by headline dividend yield or short-term price movement.
From the transcript
“It makes no sense to just look at dividends or buy backs. Really, it's the holistic cross between the two.”
“You could have a company paying a two or three percent dividend yield, but they're also you know, picking your pocket by issuing three or…”
“You need to look at both.”
From the episode
Cambria CIO Meb Faber: Masters in Business (Audio)
Meb Faber