Shareholder Yield: A Better Approach to Dividend Investing by Faber Mebane

Author:Faber, Mebane [Faber, Mebane]
Language: eng
Format: epub, mobi
Tags: Securities, ECONOMICS/Investments &#38, Business &#38
Publisher: The Idea Farm
Published: 2013-05-11T14:00:00+00:00

Dividend policy tends to be consistent, and management is often very reluctant to cut a dividend. Repurchases, as well as mergers and acquisitions, on the other hand tend to be volatile and often follow the business cycle as well as the stock market – often to the detriment of shareholders. This trend is noticeable in Figure 9 with the buyback peaks in 2000 and 2007. Since companies are more likely to spend cash when they have extra sitting around, this generally leads to more mergers and acquisitions when times are good – often right before markets turn down again. The yearly volatility from 1982-2011 of changes in dividends (7%) and capital expenditures (11%) is far less than the volatility of buybacks (49%) and mergers and acquisitions (65%).

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