We have spoken about the prevalence of stock buybacks in the marketplace currently and illustrated several ETF strategies that are predicated on companies that are actively buying back their stocks in the open market, and today we highlight yet another fund that screens equities for buyback characteristics.
FYLD (Cambria Foreign Shareholder Yield ETF, Expense Ratio 0.59%) debuted in December of last year, and will be celebrating its one year live anniversary in a few weeks, and the fund has notably raised more than $67 million since inception.
It tracks a proprietarily driven index known as the “Cambria Foreign Shareholder Yield Index” and screens internationally based stocks that are larger than $200 million in market cap for “high cash distribution characteristics”.
According to fund literature, the methodology then narrows this universe down to optimally one hundred names “with the best combined rank of dividend payments and net stock buybacks, which are the key components of shareholder yield.
The Index also screens for value and equity factors, including low financial leverage.” If model managers, advisors, or individual investors are not familiar with the concept of “Shareholder Yield,” they will likely become more acclimated with it especially if the environment that we are in (net stock buybacks are prevalent) persists several years out. FYLD as its name suggests, focuses only on foreign companies and thus as one would expect the fund has exposure to ordinary shares that are locally listed among its holdings.
FYLD follows the growing SYLD (Cambria Shareholder Yield ETF, Expense Ratio 0.59%), which debuted also in 2013 but in May, and that ETF has raised more than $212 million in assets since inception, with rising trading volume over time as well (about 36,000 shares ADV).
Fund literature states that SYLD is “an actively managed fund that employs the manager’s quantitative algorithm to select U.S. listed companies that show strong characteristics in returning free cash flow to their shareholders. Specifically, SYLD invests in 100 stocks with market caps greater than $200 million that rank among the highest in a) paying cash dividends, b) engaging in net share repurchases, and c) paying down debt on their balance sheets.
The combination of active management at a relatively low expense ratio (0.59% which compares extremely well to most actively managed ETFs) plus a focus on Shareholder Yield which will likely resonate with a broad swath of ETF investors, makes both of these products prime to grow in size and popularity over the next several years.
Cambria Foreign Shareholder Yield ETF
For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at firstname.lastname@example.org
Street One Financial is an educational/research firm utilizing the Broker Dealer services of Precision Securities, a FINRA registered Broker/Dealer.