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A big reason is because many European companies have preferred dividends over buybacks. The MSCI Europe Index was recently yielding 2.82%, well above the 1.37% for the S&P 500. Not These.Īnother consideration for shareholder yields is that they can help explain some of the disparities of dividend yields among regions. High-Yielding Stocks Are Often Too Good to Be True.Sure, a 100% Increase on a Dividend Is Nice.
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Roughly three-quarters of the WisdomTree Value ETF’s shareholder yield comes from buybacks, not dividends. “It’s expressing conviction that the company is undervalued.” That 8% net buyback yield “shows that, on average, these firms are buying back stocks that are generally cheap,” says Jeremy Schwartz, global chief investment officer at The same holds true for a dividend yield. The lower the stock price, the higher the buyback yield, and vice versa. But the ETF’s net buyback yield was nearly 7%. 28, its dividend yield was about 1.8%, not all that enticing but still above the S&P 500’s recent yield of about 1.4%. But “the share-buyback commitment is open-ended and variable.”Įxchange-traded fund (WTV), which has a value bent.
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“There’s a lot of negative response if you cut your dividend,” says Tobin. That’s partly because the size of a company’s share repurchases often vary from quarter to quarter and can lack the consistency that dividend payouts do. The higher a dividend yield, say in the 4%-5% range, the greater the chance that it could be cut or suspended-though each case is different and requires its own due diligence.Ī shareholder yield, however, doesn’t always offer the quick snapshot that a dividend yield can. When it comes to a dividend yield, higher is preferable to lower-up to a point. “And when you run out of those ideas, you should return the cash to the owners of the business,” notably via buybacks, share repurchases, or debt reduction. In calculating a company’s shareholder yield, Tobin includes paying down debt as well as dividends and buybacks-while other investors focus on the latter two.Ī good record of capital allocation, Tobin says, usually includes making sound investments that help grow earnings. Tobin points to five possible uses of cash: boosting internal growth, acquiring another company, distributing a dividend, repurchasing its own stock, or lowering debt.
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The full name of the utilities fund, for example, is the Utilities Select Sector SPDR ETF. Note: The names of the select sector SPDR ETFs are abbreviated. A buyback yield goes one step further, combining the dividends a company pays out with its share repurchases and offering a more complete picture of capital returns to shareholders. Dividends + Buybacks A dividend yield is a signature metric for investors, especially those seeking income.