Enhancing the Investment Performance of Yield-Based Strategies
17 Pages Posted: 5 May 2012 Last revised: 20 Mar 2017
Date Written: November 1, 2012
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.
Keywords: Dividends, Share Repurchases, Share buy-backs, net-debt paydown, shareholder yield
JEL Classification: G10, G12, G14
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