The Cambria ETF Trust and its investment manager, Cambria Investment Management, have launched the Cambria Foreign Shareholder Yield ETF (FYLD).
FYLD, listed on the NYSE Arca exchange, is comprised of 100 stocks in foreign developed markets that have historically ranked among the highest in paying cash dividends and engaging in share buybacks, two factors central to the concept of "shareholder yield."
In May 2013, Cambria launched the US version of the strategy, the Cambria Shareholder Yield ETF (SYLD), which has grown to approximately USD170m in assets since it began trading. According to data compiled by Index Universe and Institutional Investor, SYLD is one of the biggest ETF launches in 2013.
The introduction of FYLD expands Cambria's suite of smart beta ETFs.
Research conducted by Mebane Faber, Cambria's chief investment officer and author of Shareholder Yield: A Better Approach to Dividend Investing and The Ivy Portfolio, showed that focusing solely on dividends may result in suboptimal performance results for investors. Instead, a more holistic investment approach incorporating dividend payments with net share buybacks can produce a portfolio of companies that possess stronger free cash flow characteristics and generate higher shareholder yields than their dividend-only counterparts.
FYLD tracks the Cambria Foreign Shareholder Yield Index, which employs a quantitative algorithm to select 100 stocks in foreign developed countries with market caps greater than USD200m, as measured by the index's shareholder yield criteria. The fund offers investors a globally diversified portfolio of companies that are based across 25 developed countries and that range in size, industry and sector.
The index is constructed to ensure there is no over-concentration in one country or sector. The portfolio selection process employs value, quality and momentum factors, including an emphasis on avoiding stocks with high financial leverage. The fund will pay quarterly dividends.
"Investors have shown that they are getting smarter about their hunt for yield, and we believe that attractively valued foreign stocks that participate in buybacks and pay out dividends can help meet their need for income," says Faber. "Historically, assessing stocks based on their collective shareholder yield is a strategy that has outperformed vanilla dividend investing. Based on the research published in our book, Shareholder Yield, we believe investors need to look beyond dividends and also incorporate net share buybacks as an important yield-producing addition."
