Why Shareholder Yield Beats Dividend Yield | #12

Published: Aug. 10, 2016, 5 p.m.

If you\u2019re a dividend investor, Episode 12 is for you. Yes, historical market data tells us that dividend stocks outperform the broad market. But that\u2019s where too many investors stop. That same historical market data suggests we can improve our dividend-strategy returns\u2014significantly\u2014by 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 \u201cshareholder yield.\u201d 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\u2014but in less visible ways than dividends. That\u2019s a problem because it turns out, when we combine these three yields, this \u201cshareholder yield\u201d strategy has posted better historical returns than dividends alone. How much better? Find out in Episode 12.\nLearn more about your ad choices. Visit megaphone.fm/adchoices