Enhancing the Investment Performance of Yield-Based Strategies

Abstract:     
High dividend yield stocks do not reliably earn above-average risk-adjusted returns. More complete measures of shareholder yield, which account for net share repurchases, perform better. We explore the use of net-debt paydown as a way to further enhance shareholder yield. The addition of net-debt paydown enhances risk-adjusted returns and creates a shareholder yield metric that is more robust over time. We also explore the technique of separating yield metrics by payout percentage as a way to enhance return predictability. We find some evidence that using payout percentage within a yield category can systematically improve portfolio performance.

Number of Pages in PDF File: 18

Keywords: Dividends, Share Repurchases, Share buy-backs, net-debt paydown, shareholder yield

JEL Classification: G10, G12, G14

working papers series