Value-Investing

Shareholder Yield Stock Screener

Use this screener to select the companies that have returned the highest dividends including any share buyback program.

Shareholder Yield is the combination of the following:

Dividend Payouts
Stock Repurchase Program

If a company trading at $40 will pay an annual dividend of $1, the DY is 2.5%. If the same company had 1,000,000 shares outstanding at beginning of year and 900,000 at end of year, the company's buyback yield would be 10%. Summing the two, you get a shareholder yield of 12.5%.

Shareholder yield has been extensively backtested by O'Shaughnessy in "What Works On Wall Street", and appears to be a superior signal to just dividend yield. Basically, he had a screen called Cornerstone value, a 50 stock screen with a one-year hold which used DY as the last selection criterium. He then kept everything the same except that he used Shareholder Yield instead of DY. He tested between 1952 and 2003. With DY, annual return was 17.1%, sharpe ratio of 0.65. With SY, annual return was 17.8%, sharpe ratio of 0.71."

Shareholder yield seems to take care of fashions regarding buybacks versus dividends as it encompasses both.

The standard Piotroski (Price to book) stock screener catches all those companies that are on the up and are undervalued but, by definition, can not include those companies that have had a problem but have been marked down too much by the market. The 'Shareholder Yield' signal is good at capturing those companies that are not necessarily trending up but are perhaps steady, boring cash generators. Just the sort of companies Buffet likes!

It is important to remember that, besides dividends, a corporation can take other actions with free cash flow that inure to the benefit of shareholders – namely, share repurchases and debt reduction. Share repurchases pay out cash to selling shareholders in the open market and increase the percentage share of the firm owned by remaining shareholders. Academic studies have concluded that share repurchases -- on average -- benefit shareholders similarly to cash distributions.

How does this stock screener work?

By default it takes the 20% highest shareholder yielded companies and then sorts these based on piotroski score. (9 point scoring system). But with the silverlight application, you can easily change the sorting of the selection (For example by highest relative strenght).

Remarks:

One should keep in mind, however, that share repurchases are not always done at attractive prices below the intrinsic value of the shares tendered; sometimes they are done at prices above the intrinsic value (which destroys value). Furthermore, share repurchases can be isolated events that are not repeated often, whereas dividends are more permanent distributions that companies rarely reduce.