Meb Faber – Here’s Why Investors Are Missing Out By Ignoring Total Shareholder Yield

Johnny HopkinsMeb Faber2 Comments

One of the blogs that we follow closely here at The Acquirer’s Multiple is mebfaber.com. Meb provides a lot of great investing insights in his articles. Earlier this year he wrote a great piece on the importance of looking at total shareholder yield instead of simply looking at dividend yield when considering stocks to purchase. The article is titled Cash Cows of the Dow.

We have to agree, and that’s why we include all three of the metrics in our deep value stock screeners – dividend yield, buyback yield, and total shareholder yield.

Meb’s article is a must read for all investors.

Here’s an excerpt from that article:

Long time readers know that I have been a shareholder yield advocate on the blog for almost a decade.  (We used to call it net payout yield back then, and we define it as the combination of dividends and net buybacks.)

People are slow to change of course, but my hopes are that eventually you all come around to a little common sense. Sometimes books and white papers are too much, and all that is needed is a simple chart or table that will change people’s minds.

Remember the old Dogs of the Dow strategy where you just invest in the 10 highest yielding Dow stocks each year? This strategy was popularized by O’Higgins, and historically beat the market.  But as you all know, a shareholder yield approach does even better historically.

Below we list all 30 Dow stocks, their dividend yield, their net buyback yield, and their total shareholder yield.

screen-shot-2017-01-14-at-11-39-35-am

We then group the Dow stocks into the Dogs strategy and the shareholder yield strategy (what we call the Cash Cows.)  Not surprisingly, the Dogs have the highest yield.  However, they also have the lowest buyback yield.  Overall the Dogs have a very similar shareholder yield to the entire Dow, but actually is slightly lower.

The Cash Cows, despite having the lowest dividend yield, have by far the largest buyback yield resulting in a total shareholder yield that is nearly double that of the Dogs and about a third higher than the Dow.

screen-shot-2017-01-14-at-11-39-06-am

Here’s where it gets even more interesting.  The Cash Cows strategy also has the cheapest valuations (median) across all variables except P/E ratio (and then it only nearly misses).

So a much higher total yield, and lower valuations.  What’s not to like?

You can read the article at mebfaber.com here.

For more articles like this, check out our recent articles here.

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2 Comments on “Meb Faber – Here’s Why Investors Are Missing Out By Ignoring Total Shareholder Yield”

  1. Awesome article. Makes a lot of sense!
    How is Meb’s Value mixed with momentum investing ETF preforming so far? Sounds very interesting to mix with momentum, do you think there’s anything there worth looking at?

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