The Meb Faber Show

If you’re a dividend investor, Episode 12 is for you. Yes, historical market data tells us that dividend stocks outperform the broad market. But that’s where too many investors stop. That same historical market data suggests we can improve our dividend-strategy returns—significantly—by a few tweaks. What are they? Well, paying dividends is just one of several ways that corporate managers can return profits to shareholders. They can also buy back stock and pay down debt (a subtler form, but valuable nonetheless). Together, we call these three returns “shareholder yield.” Shareholder yield provides investors a more holistic perspective on the degree to which corporate managers are sharing profits with investors. So when an investor limits his or her analysis simply to dividends, he/she runs the risk of overlooking companies that might be returning major profits to shareholders—but in less visible ways than dividends. That’s a problem because it turns out, when we combine these three yields, this “shareholder yi