I'm talking about nearly double the average 10% annualized gains that you'd get by buying and holding the S&P 500 or the Dow Jones Industrial Average over the long-run. To figure out which names you should own, it boils down to three simple metrics that measure the cash a company is giving back to its investors each year.
What is the secret sauce I'm talking about? It's shareholder yield.
In a nutshell, shareholder yield is made up of anything that directly returns cash or equity to your portfolio. Yes, that includes obvious moves such as dividends -- but it also includes share buybacks and paying down debt.
Any of those three corporate actions can unlock significant value for shareholders, and the data back it up. According to research by James O'Shaughnessy, over a 40-year period, large-cap stocks with the highest shareholder yield delivered average gains of 18.05%. That's almost double the returns that investing in the vanilla big index would have earned you.
With low interest rates and record levels of cash sitting on corporate balance sheets, management teams are looking for the most effective ways to return value to shareholders. It's not one size fits all, either -- the best mix varies from company to company. But by looking at the trifecta of dividends, buybacks and debt extinguishment, you can be sure that you won't miss out on any of the proceeds.
With that in mind, here's a look at five names that have provided superior shareholder yield in the last year.