Holistic Yield Investing: Meb Faber’s Unique Screening Approach

Stocks that reward shareholders by paying dividends, lowering the number of shares outstanding and reducing debt.

Focusing on companies that pay dividends and then reinvesting the dividend payments is a reasonable investing approach. However, it ignores the other shareholder-oriented actions companies can take to boost their value. There are essentially five choices companies have for deploying capital:

• invest in existing operations,

• pursue mergers and acquisitions (M&A),

• pay down debt,

• repurchase shares, and

• initiate or increase dividend payments.

The basic shareholder yield measure combines the impact of the cash dividends and share repurchases to better capture the value of capital returned to shareholders than dividend yield alone. Investment expert Mebane “Meb” Faber advances the shareholder yield to include the impact of change in debt.

Faber is a cofounder and the chief investment officer of Cambria Investment Management. He manages Cambria Investment’s exchange-traded funds (ETFs) and separate accounts. His research has covered a wide range of investment strategies and topics, including shareholder yield, global valuations, global asset allocation, endowment investing, venture capital and angel investing, behavioral finance, and trend and momentum following.