Shareholder Yield Rocks the Investment World
NEW YORK (TheStreet) -- Given the chance to own stocks that are undervalued, have better-than-average upside potential and offer cash payouts to shareholders, most investors are saying "Yes, please!"
This is shareholder yield, and one of the other secret ingredients is the focus on companies that are buying back their own shares. Some call this the "stealth, tax-free dividend" that adds to share price growth.
By reducing shares outstanding through stock buyback programs, companies such as Usana Health Sciences (USNA) have reduced share dilution and goosed the share price higher.
This combination of compelling valuations, meaningful dividend payouts and stock buyback has helped send the shares of Meredith Corp. (MDP) to new 52-week highs.Meredith is a media and marketing company. It makes its profits in magazine publishing and related brand licensing, television broadcasting, digital and customer relationship marketing, digital and mobile media and video creation operations in the United States. Let the following one-year chart serve to illustrate how offering shareholder yield and a lucrative business model can propel a company's share price to new and bountiful heights. MDP data by YCharts
MDP recently announced it will launch a new magazine and television segment based on its popular recipe Web site Allrecipes.com. It steps into the earnings confessional on Thursday. Analysts are anticipating around a 7.5% increase in its quarterly EPS. When it comes to participating in the shareholder yield thesis, investors should consider the relatively new Cambria Shareholder Yield ETF (SYLD). It's an actively managed fund that employs the manager's quantitative algorithm to select U.S. listed companies that show strong characteristics in returning free cash flow to their shareholders. It's been available to the public since May 14 of the year. Specifically, SYLD invests in 100 stocks with market caps greater than $200 million that rank among the highest in (a) paying cash dividends, (b) engaging in net share repurchases, and (c) paying down debt on their balance sheets. That last criterion -- paying down debt on its balance sheets -- may be one of the most under-appreciated ones. When pointed out, shareholders immediately recognize that low levels of debt maintenance usually means more free cash flow for dividends and stock buybacks.
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