Barron's interviewed Meb Faber of Cambria Investments. The main focus was the Cambria Shareholder Yield ETF (SYLD). Shareholder yield refers to "companies that are returning their cash to investors through three attributes - dividends, buybacks and debt paydown." Investors of course love dividends but share buybacks and debt reduction are more tax efficient than dividends which are taxed at ordinary income rates.
While I wouldn't say SYLD has a high yield, it has been more than the S&P 500 the vast majority of the time. I threw in the Schwab US Dividend for context.
The article mentioned that SYLD benchmarks to midcap stocks.
There's kind of a mixed bag here for the results. In addition to what is shown above, in 2022 SYLD only dropped 6.12%. It offered no crisis alpha though in the 2020 Pandemic Crash and in 2018 it was down 13.5% versus 4.5% for VOO. If you're into Calmar Ratio and Excess Kurtosis, neither of those are particularly good for SYLD either.
SYLD is obviously a valid way to access broad market exposure but it does require a willingness to occasionally look much different than market cap weighted indexes. That's easy to say but hard to actually do.
Toward the end of the interview was a quote from Meb that I've seen before and that we've talked about related to having half of a portfolio in trend (managed futures) but he concedes that "I don’t think anyone else on the planet believes that." I am far from a 50% in trend guy but as Meb notes "...as a compliment, it is probably the No. 1 thing you can add to your portfolio to diversify returns and risk."
In getting ready to write this blog post, I stumbled into another fund that dabbles in shareholder yield, the Leatherback Long/Short Alternative Yield ETF (LBAY). LBAY goes long companies that it "believes will provide sustainable shareholder yield and short companies it believes will decline in price." It can also sell options for extra income. Based on the current holdings, it's long 129% and short 34% with a little bit in cash. The holdings spreadsheet didn't show any short options on the books currently. The process for selecting stocks to short, per the prospectus, focuses on various types of idiosyncratic risks as opposed to just companies deemed to be poor stewards of capital (the opposite of shareholder yield).
They position LBAY as a core holding primarily but it can also function, they say, as an alternative. The fund has been around for just about four years so we can get some sense of how it does. First as a core holding. BLNDX is a client and personal holding.
The performance has been good but the standard deviation wasn't very low. LBAY's Calmar and Kurtosis are each pretty good but not great. The yield has mostly been in the mid-threes getting close to 4%. There is a skew in the performance chart though. LBAY was up 22% in 2022 and I'm not sure if that is repeatable.
Now as a diversifier.
The returns using LBAY as a diversifier weighted at 20% are compelling but again the volatility leans high. The Calmar and Kurtosis number are inferior with LBAY as a diversifier than using client/personal holding BTAL or managed futures.
And a closing note on Cambria, if the concept of shareholder yield intrigues you, Cambria has several others including Large Cap Shareholder Yield (LYLD) but that fund has only been around since the summer so not really backtestable yet.
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