This is the editorial of our monthly Shareholder Yield Letter published on 11 March 2025. Sign up here to get it in your inbox on the second Tuesday of every month.
More information about the newsletter can be found here: The best large cap investment strategy ever
Learn why Shareholder Yield is one of the most powerful investment strategies you can use. A new research study confirms that companies returning cash to investors—through dividends or buybacks—deliver superior long-term returns.
The data proves that in all markets, total shareholder yield (dividends + buybacks) is the best predictor of performance. The key success with this - and any good strategy - is to stay patient, trust the process, and continue investing systematically. This article will reinforce your confidence and show you why sticking with Shareholder Yield is a winning move.
Estimated Reading Time: 5 minutes
In September 2024 we received an in-depth research report that confirms what we've known all along - that it is a smart choice to use a high shareholder yield investment strategy in your portfolio.
Dividends or Buybacks? Both Work
For decades, dividends were how companies rewarded investors. More recently, especially in the US, buybacks became more popular. Companies buy back their shares, reducing the number in the market and increasing the value of remaining ones.
European companies still prefer dividends, which is why European stocks in your portfolio often have higher dividend yields than US stocks.
But here is what is important: it doesn't matter which method companies use to return cash. What matters is the total amount returned to shareholders.
The Proof Is in The Numbers
Verdad Advisers last year analysed 24,000 companies going back to 1995. They ranked stocks by:
-
Dividend yield (cash payouts)
-
Buyback yield (shares repurchased)
-
Total shareholder yield (dividends + buybacks)
What They Found:
-
In the US, high buyback yields lead to outperformance
-
In Europe, high dividend stocks perform well, but those also buying back shares do even better
-
In all markets, total shareholder yield is the best predictor of future performance
As you know a high Shareholder Yield is exactly the metric we use in the newsletter.
How Well It Works
This chart shows you how well Shareholder Yield works.
On the horizontal axis 1 = low Shareholder Yield companies and 10 = high shareholder yield companies.
On the vertical axis you can see the average returns over the next 12 months.
As the shareholder yield gets higher (from left to right) the returns increase with the highest returns occurring when the shareholder yield is highest (at 10).
You Are Already Following the Right Strategy
When you subscribe to the Shareholder Yield Letter you are choosing a strategy based on facts, not speculation. You're not chasing fads or trying to guess market movements. Instead, you're following a process built on decades of research, as this research study has just confirmed this, again!
Total shareholder yield isn't about predicting the future. It's about investing in companies that consistently return cash to shareholders. Over time, these stocks have delivered better returns than those focused on just dividends or buybacks alone.
What This Means
Already a subscriber? Then there's nothing you need to change. Just keep following the newsletter’s recommendations:
-
Follow the ideas in each month's letter - every stock is selected based on total shareholder yield, the strongest predictor of long-term returns
-
Stay patient - markets fluctuate, but companies returning cash to shareholders outperform over time
-
Trust the process - you're using a strategy backed by extensive data
The Bottom Line
You know sound investing isn't about chasing the next big thing. It's following a process that works. You've made the right decision by subscribing to the Shareholder Yield Letter.
The research confirms it. The data proves it.
Now, you just need to stay the course.
Your analyst wishing you profitable investing!
FREQUENTLY ASKED QUESTIONS
1. What is Shareholder Yield, and why should I care?
Shareholder Yield is the total cash a company returns to investors through dividends and share buybacks. It matters because companies that consistently return cash tend to outperform the market. This strategy is backed by decades of research.
2. Is a high dividend yield enough, or should I focus on buybacks too?
Dividends alone do not tell the full story. Buybacks reduce the number of shares in the market, increasing the value of the remaining ones. The best returns come from companies with a high total shareholder yield (dividends + buybacks).
3. How do I know if a company has a strong Shareholder Yield?
Look at both dividend yield and buyback yield together. If a company has a high dividend yield but issues new shares, that is a red flag. You want companies that reduce their share count while paying dividends.
4. Does this strategy work better in some markets than others?
Yes. In the US, buybacks drive performance. In Europe, high dividend stocks do well, but those that also buy back shares perform even better. Across all markets, total Shareholder Yield is the strongest indicator of future returns.
5. If Shareholder Yield works so well, why does not everyone use it?
Most investors chase short-term trends, while institutions focus on their quarterly results. Shareholder Yield requires patience. The data shows it works, but only investors who stick with it benefit from its long-term power.
6. What happens during market downturns?
Companies with high Shareholder Yield tend to be more resilient because they have strong cash flow. However, share prices still fluctuate. The key is to stay the course and not panic.
7. How do I use this strategy in my portfolio?
You can select stocks with high total Shareholder Yield yourself, or you can follow a research-backed service like the Shareholder Yield Letter. It removes the guesswork and helps you stay disciplined.
