Cambria Investment Management, a California-based investment adviser, has announced the launch of its third exchange-traded fund, the Cambria Foreign Shareholder Yield ETF (FYLD).
Listed on the NYSE Arca, the fund is linked to the Cambria Foreign Shareholder Yield Index, an index consisting of non-US developed market stocks offering a high shareholder yield.
The initial screening universe for the index includes stocks in non-US developed countries with marketing capitalizations over $200 million. The index is comprised of the 100 companies with the best combined rank of dividend payments and net stock buybacks, the key components of shareholder yield.
The index is constructed to ensure there is no over-concentration in one country or sector. The selection process employs value, quality and momentum factors, including an emphasis on avoiding stocks with high financial leverage.
In May 2013, Cambria launched a US version of the strategy, the Cambria Shareholder Yield ETF (SYLD), which has grown to approximately $170 million in assets since it began trading.
The fund is based on research conducted by Mebane Faber, Cambria’s Chief Investment Officer and author of ‘Shareholder Yield’ and ‘The Ivy Portfolio’, showing that focusing solely on dividends may result in suboptimal performance results for investors. Instead, a more holistic investment approach incorporating dividend payments with net share buybacks can produce a portfolio of companies that possess stronger free cash flow characteristics and generate higher shareholder yields than their dividend-only counterparts.
According to Faber : “Investors have shown that they are getting smarter about their hunt for yield, and we believe that attractively valued foreign stocks that participate in buybacks and pay out dividends can help meet their need for income. Historically, assessing stocks based on their collective shareholder yield is a strategy that has outperformed vanilla dividend investing. Based on the research published in our book, ‘Shareholder Yield’, we believe investors need to look beyond dividends and also incorporate net share buybacks as an important yield-producing addition.”
Eric Richardson, Cambria’s Chief Executive Officer, added: “Based on the early success of SYLD, we are pleased to bring its foreign counterpart to market. Cambria continues to produce smart beta funds that provide investors with new investment ideas inside a low-cost ETF vehicle.”
The fund has an expense ratio of 0.59% and will pay quarterly dividends.
Cambria’s first ETF was the Cambria Global Tactical ETF (GTAA) launched via the AdvisorShares platform. The fund seeks to preserve and grow capital by producing absolute returns with reduced volatility and manageable risk and drawdowns.