New Yield ETF Targets Dividends, Buybacks and Debt Reduction
May 14th, 2013 at 11:00am by John Spence
A new active ETF launched Tuesday and co-managed by The Ivy Portfolio author Mebane Faber will take a unique approach to generating yield for investors.
Cambria Shareholder Yield ETF (NYSEArca: SYLD) is an actively managed fund of U.S. stocks that rank high in paying cash dividends, buying back shares and paying down debt.
Cambria Investment Management says these three factors are collectively known as “shareholder yield.”
“Investors continue to search for income, but they should be wary of a narrow focus on dividends,” Faber said. “Historically, assessing stocks based on their collective shareholder yield is a strategy that has outperformed vanilla dividend investing.”
He said investors should look further than dividends when identifying companies with strong free cash flow characteristics.
Dividend-themed ETFs have been extremely popular with investors looking for yield in a low-rate environment for bonds. The largest ETFs in the category include Vanguard Dividend Appreciation ETF (NYSEArca: VIG), iShares Select Dividend ETF (NYSEArca: DVY) and SPDR S&P Dividend ETF (NYSEArca: SDY).
Cambria is incorporating other factors than just dividends in the new ETF, which employs a quantitative algorithm to select U.S. stocks with market caps greater than $200 million, as assessed by the shareholder yield qualifications. The fund expects to pay yearly dividends.
SYLD will charge an expense ratio of 0.59%.
Chris Hempstead at WallachBeth Capital said the fund is a next-generation dividend ETF.
“Anything that throws off yield will grab the attention of Wall Street,” he said.
Next page: ‘Shareholder yield’