Recently, a new subscriber asked us to implement shareholder yield and payout yield into our company page and our screener.
On careful consideration, we agreed that these metrics would prove most valuable in both requested areas, so we have introduced them. First off, let's cover off what these measures mean.
Payout Yield = (Total Dividends + Total Buybacks) / Market Cap Amount
This is what a lot of people do call shareholder yield. However, we've chosen to implement the more common view of shareholder yield today as suggested by Mebane Faber. So, to eliminate confusion, we've gone with the name 'Payout Yield'.
This is the 'true yield' to you, as an investor, in cash terms. When a company pays a dividend, you receive it as cash. When a company buys back it's own shares, your effective ownership percentage of the company goes up, and the number of shares available in the market goes down which in turn should push the price up. Future dividend yield and price increases should be magnified, so ultimately you see this return to your portfolio in the fullness of time.
Backtesting shows a ~1.5% increase in annual performance when choosing payout yield over ordinary dividend yield.
Shareholder Yield = (Total Dividends + Total Buybacks + Change in Debt) / Market Cap Amount
Shareholder yield as we calculate it factors in the change in debt in the company. If the company is paying down debt or reducing debt, this works in the shareholder's favour. If the company is taking on more debt, this comes at a cost and ultimately works against the shareholder in the long run. Of course, the debt can be used to grow the business and generate superior returns, but this still comes at a cost in the short term.
Using this metric instead of payout yield adds roughly another 1% increase to annual performance.
We've added 'Shareholder Yield' and 'Payout Yield' just below the 'Dividend Yield' in the 'Other Valuations' section of the company page.
You can find the screener fields under the 'STRIDE Added - Yield' section of the financial filters.
We hope our users find these additional fields as valuable as we do. If you aren't one of our users just yet, you'll be happy to know that we offer a free live demo to anyone who's interested in STRIDE. In the demo, we cover all the ins and outs of our platform, and how it could be used to aid your investment strategy. Happy investing!