- File Size: 3303 KB
- Print Length: 58 pages
- Publisher: The Idea Farm; 1 edition (May 12, 2013)
- Publication Date: May 12, 2013
- Sold by: Amazon Digital Services LLC
- Language: English
- ASIN: B00CRLSL4W
- Text-to-Speech: Enabled
- Word Wise: Enabled
- Lending: Enabled
- Amazon Best Sellers Rank: #238,004 Paid in Kindle Store (See Top 100 Paid in Kindle Store)
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Shareholder Yield: A Better Approach to Dividend Investing Kindle Edition
|Length: 58 pages||Word Wise: Enabled||Enhanced Typesetting: Enabled|
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Top customer reviews
It starts with a hilarious poem about the six wise men from Indostan, each of whom perceives one aspect of the elephant & mistakes it for the whole. (A very minor quibble: the story comes from the Jain tradition, not Hindu or Buddhist.)
The main conclusion of the book is that a portfolio consisting of stocks screened for high "Shareholder Yield" outperforms the markets (has a positive Alpha, in industry parlance) - without taking on additional risk (at least as measured by standard deviation of returns). Shareholder Yield is defined as the sum of three factors: dividend yield, net share buybacks (buybacks minus new stock issuance) and net debt pay-down. The author systematically walks us through each of these three factors and presents evidence that each factor individually adds Alpha to the portfolio. And to top it off, he presents evidence that combining the three factors outperforms each of the three individual factors.
The introduction quotes Warren Buffett that the main financial job of a CEO is allocating capital. That is the whole idea behind this book as well, from the perspective of an investor looking to outperform the market. The three aforementioned factors are the levers that a CEO has to return value to the shareholder by way of allocating capital.
The data presented are only from 1982 to 2012, a relatively short time-period for measuring the success of an investment strategy. This is mainly because a key law was changed in 1982, which led to share buybacks becoming more and more popular tools for capital allocators.
Overall the book is highly recommended for a short and concise presentation of a focused investment strategy.
Mr. Faber is very clear about the data he used, the time frames and comparisons of various markets. There is always a problem with backtesting (e.g., curve fitting, no out of sample data for confirmation, etc.), but if the researcher is careful in his approach this is a valid way to find out if something could have worked in the past. Mr. Faber makes a very good case that "shareholder yield" is a better long-term approach than dividend reinvestment or simple buying and holding long term. He also makes a good case that it's something that will probably work in the future.
In the e-book he also provides links to original published studies he used as a jumping off point for his own research. Read them.
I believe "Shareholder Yield would be an excellent addition to any investor's library--far better and more important than 90% of the books I've read on the subject. However, please remember that he's an investment advisor and runs several funds that invest the shareholder yield way. He obviously has a strong belief in the results of his research.