BALTIMORE (Stockpickr) -- Investors like dividends a little too much. I realize that sounds crazy -- especially for someone who writes a column about stocks likely to boost their dividends, but bear with me.
We're in a tricky time for dividend payouts. Even though the S&P 500 sports a higher yield today than it's sustained pretty much anytime in the last two decades, there are a couple of challenges levied against dividend investors right now. The first is the fiscal cliff, a ticking time bomb that threatens to hike dividend tax rates up to what you pay for regular earned income. That could be a big diluter for the total returns investors are expected to see in 2013.
Another is the extreme low interest rate environment that stocks have been in for the last couple of years. But there's another metric that investors should be looking at for a fuller picture of how well a firm is returning cash to investors: shareholder yield.According to research by Cambria Investment Management CIO Mebane Faber, shareholder yield historically generates bigger returns than dividends alone. Much bigger returns. So, how do you find shareholder yield? In short, you want to identify companies that are using cash to return value to shareholders, either by paying them cash or by increasing the claims that each shareholder has on company assets. Firms can do that three ways: pay a dividend, buy back shares, or pay down debt. There are a few caveats to measuring shareholder yield. For starters, it's important to look at net numbers -- who cares if a firm paid off its debt, paid a dividend, and bought back shares if it issued a boatload of shares to finance that spending. We're only interested in companies that returned value to shareholders in the process. >>5 Stocks Warren Buffett Loves Here's a look at five names that have provided superior shareholder yield in the last year . Goldman Sachs As one of the few legacy investment banks to survive the financial crisis of 2008, Goldman Sachs (GS) is benefitting from decreased competition as the capital markets continue to heat back up. Goldman's reputation precedes it -- and while that's not always a good thing, it doesn't change the firm's status as one of the most effective investment banks on Wall Street. Don't let the 1.6% dividend yield fool you: the firm has also paid out some enormous cash to the benefit of shareholders in the last year. Goldman tops out our list with a 33% shareholder yield.
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