Cambria’s new ‘shareholder yield’ ETF targets dividends, buybacks and debt paydowns

May 22nd, 2013 | By | Category: Equities

Cambria Investment Management, manager of the AdvisorShares Cambria Global Tactical ETF (GTAA), has added to its exchange-traded fund line-up with the launch of the actively managed, income-focused Cambria Shareholder Yield ETF (SYLD).

Cambria’s new ‘shareholder yield’ ETF (SYLD) targets dividends, buybacks and debt paydowns

Meb Faber, Chief Investment Officer, Cambria.

The fund, which has been listed on the NYSE Arca exchange, is composed of US stocks that have historically ranked among the highest in paying cash dividends, engaging in share buybacks and paying down debt. These three factors are collectively known as “shareholder yield.”

The strategy behind the fund is based on research conducted by Cambria’s Chief Investment Officer, Mebane T. Faber, which shows that focusing solely on dividends may result in sub-optimal performance results for investors.

Instead, a more holistic investment approach consisting of the three shareholder yield components – cash dividends, share buybacks and debt repayments – produces a portfolio of companies that possess stronger free cash flow characteristics and generated higher shareholder yields than their dividend-only counterparts.

“Investors continue to search for income, but they should be wary of a narrow focus on dividends,” said Faber. “Historically, assessing stocks based on their collective shareholder yield is a strategy that has outperformed vanilla dividend investing.”

The fund employs a quantitative algorithm to select 100 US stocks with market caps greater than $200 million, as assessed by the shareholder yield qualifications. The fund offers investors a diversified portfolio of companies, ranging in size, industry and sector, and is managed to ensure that no one sector is over concentrated. The algorithm also employs value, quality and momentum factors in the final portfolio selection.

Major holdings currently include Boston Scientific, Usana Health Sciences, CVR Energy, Nu Skin Asia Pacific and Mastec. The financials sector has the largest representation with a weight of 20%, followed by consumer discretionary with 17%, information technology with 15%, and industrials and consumer staples each with 13%.

Eric Richardson, Cambria’s CEO, added: “SYLD, in selecting a portfolio based on the three shareholder yield factors of dividend payments, share buybacks and debt reduction, is the first ETF of its kind. While the high-yield ETF space has become crowded, we hope SYLD will disrupt the market and open the eyes of investors to a more holistic approach to income investing.”

The fund has an expense ratio of 0.59% and is expected to pay yearly dividends.

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