Progressively Comprehensive Payout Metrics
December 24, 2013 - Buybacks-Secondaries, Fundamental Valuation
Do firm efforts to pay shareholders directly (via dividends) and indirectly (via share repurchases and paydown of debt) translate to stock outperformance? In their May 2012 paper entitled “Enhancing the Investment Performance of Yield-Based Strategies”, flagged by a subscriber, Wesley Gray and Jack Vogel compare aggregate performance statistics of stocks ranked by the following four progressively comprehensive yield metrics:
- DIV: dividend yield.
- PAY1: payout encompassing dividend plus share repurchase yield.
- PAY2: payout encompassing dividend plus net repurchase (repurchase minus issuance) yield.
- SHYD: comprehensive shareholder yield encompassing dividend plus net repurchase plus net debt paydown (annual difference in debt load divided by market capitalization) yield.
They focus on annually rebalanced, value-weighted portfolios with financial stocks excluded. Using monthly return, dividend, stock repurchase/issuance, debt load and other accounting data for a broad sample of U.S. stocks during 1971 through 2011, they find that: Keep Reading