This year is shaping up to be a good one for those using a Total Yield strategy.
For those who aren’t familiar, it’s a simple strategy I’ve been talking about for the past few weeks. I’ve been telling income investors that if they’re investing in just any company that pays a dividend, they may be leaving a lot of money on the table.
That’s why instead of simply focusing on companies with high dividend yields, the Total Yield strategy looks at companies that reward shareholders with two “extra” payment methods in addition to dividends — ones that add rocket fuel to a dividend stock’s potential returns. (I talked about each of these “extra” payment methods in detail here and here.)
[ad#Google Adsense 336×280-IA]It’s simple. Investing in dividend-paying companies that give out these two “extra” payments over ones that don’t can mean the difference between merely keeping pace with the market and beating it.
Here’s the proof: from 1982 to 2011, the Total Yield strategy returned 15.04% annualized, handily outperforming the S&P 500, which returned 10.96% annualized over the same period.
Extensive back-tested research has shown that by using the Total Yield strategy — choosing stocks that pay dividends, buy back shares of their own stock and reduce their debt loads — investors have seen extraordinary success.
Just look at how $100,000 invested back in 1982 would have grown through 2011…
But this is just a broad example of the potential returns Total Yield can produce.
So today, I’d like to tell you about one of my favorite Total Yield investments for 2014 and beyond. It’s one that’s managed to outperform even Buffett’s Berkshire Hathaway portfolio by a margin of 8-to-1.
The Cambria Shareholder Yield ETF (NYSE: SYLD) is pretty much a no-brainer investment for those interested in capturing Total Yield.
That’s because Total Yield is exactly what this fund is designed to calculate.
Since the fund’s inception in May of 2013, investors have poured over $180 million into the ETF. It was ranked the “Best ETF Launch of 2013” by Bloomberg.
It’s easy to see why…
The fund combines the three Total Yield cash-return factors — dividends, buybacks, and debt reduction. It also uses proprietary calculations that take into effect share-price momentum and valuation to arrive at an evenly weighted portfolio of the top 100 Total-Yield stocks in the United States.
Here’s a snapshot of the fund’s top 10 holdings on January 2, 2014, demonstrating the phenomenal returns that SYLD’s Total Yield investments have generated in the past…
You can see that no holding in the top 10 has earned less than 24% in the few months since SYLD was launched… and several holdings have topped 30%, 40% and even 50%.
In fact, in the six-month stretch between its inception and January 2, 2014, SYLD managed to beat the returns of Buffett’s Berkshire Hathaway by a nearly 8-to-1 margin.
Take a look…
Now, I can’t promise that SYLD or other Total Yield picks will do quite this well all the time. But it sure does speak volumes when you’re invested in something that’s outperformed the greatest investor on Earth… even for a span of a few months.
With all of its recent success you might expect to see sky-high prices for the SYLD fund.
Fortunately that’s not the case…
The fund’s annual expenses are also reasonable for an actively managed fund of this type — only 0.59% per year.
SYLD is one of those rare “all-weather” funds that should form the core of every income-investor’s portfolio. It’s just one example of many that show how if you’re not investing in Total Yield stocks — stocks that reward you with a combination of dividends, share repurchases and debt reduction — you’re missing out on loads of potential returns.
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Source: Dividend Opportunities