Shareholder Yield isn’t a new concept to the retail investor, but it has been spotted the news recently.
But what exactly is Shareholder Yield?
William W. Priest, of Epoch Investment Partners, defines shareholder yield as a combination of the following:
- Dividend Payouts
- Debt Reduction
- Stock Repurchase Programs
It has been documented that dividend payouts are at very low levels, some say as much as thirty years have gone by since dividend payouts were at such low levels. Some companies are letting cash reserves grow to cumbersome levels and are being pressured by shareholders to put that cash to work!
Companies that allow their cash to sit idle on their balance sheet are often targets of private equity buy out firms and in such circumstances, companies will face severe pressure to put that cash to shareholder-friendly use…
Enter the Shareholder Yield Strategy!
Mr. Priest suggests that focusing on picking stocks that will, or will be forced to, return cash to shareholders in one of the previously listed three ways is certain to make money for investors. This is what he refers to as an absolute return.
While quite similar in nature to most Free Cash Flow strategies, Priest’s firm has been hired to put together a Global Dividend Yield Strategy that has returned a stunning 9.5% yield in a market that typically offers between a 6-8% yield.
Learn more about Shareholder Yield and Epoch Investment Partners