Cambria Investment Management, the El Segundo, California-based money manager of the AdvisorShares Cambria Global Tactical ETF (GTAA), has launched the first ETF in a lineup of funds that will provide exposure to yield rich equities both in the US and abroad. It’s the company’s first solo effort after teaming up with AdvisorShares on GTAA, a global tactical exchange-traded fund.
The income-focused Cambria Shareholder Yield ETF (SYLD) is comprised of US stocks that have historically ranked among the highest in shareholder yields. The fund employs an algorithm to select companies based on their historic free cash flows, dividend yield, share buybacks and debt repayment. Cash dividend payout, share buybacks and debt repayment are collectively known as ‘shareholder yield’. The algorithm also considers quality, value and momentum factors in the final portfolio construction.
Cambria’s research shows sole focus on dividend yield may lead to suboptimal performance as investors tend to miss the broader picture. Historically, share repurchases have outpaced dividends, while free cash flow is a classic value investment approach. So a more holistic investment approach comprising of the three shareholder yield components – cash dividends, debt repayments and share buybacks, produced portfolios with better free-cash-flow attributes and generated higher returns than their dividend-only peers.
The fund selects 100 publicly traded US stocks with market caps greater than $200 million though at times it may also invest in foreign and emerging market American Depositary Receipts. SYLD has exposure in a diversified portfolio of companies, ranging in size, industry and sectors, and is managed actively to avoid over concentration in a particular sector.
However, the interesting fact about SYLD is that it is neither a classic income fund, nor a traditional dividend fund. Although it proposes to pay dividends once a year, the objective of the fund is absolute return.
The financials take the top spot from a sector perspective with about 20 percent of total assets while consumer discretionary and technology occupy the number two and three spots, respectively. The fund is skewed towards large capitalization stocks while mid-caps contribute about one-third of the portfolio. Surprisingly, small caps make up only one-tenth of the assets.
The fund has an annual expense ratio of 0.59 percent.
Disclosure: No holdings
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