In an O’Shaughnessy Asset Management research piece, Jamie Catherwood discusses the empirical evidence for, and history of buybacks.
Summary:
The article “The Factor Archives: Shareholder Yield” from O’Shaughnessy Asset Management (OSAM) explores the concept of shareholder yield, which combines dividends and share repurchases to assess how companies return capital to shareholders. OSAM defines shareholder yield as the sum of a stock’s dividend yield and the percentage of net share buybacks over the previous twelve months.
The article highlights that companies with high shareholder yield have historically outperformed the broader market. OSAM’s research indicates that stocks in the top decile for shareholder yield have outperformed the all-stocks universe by 3.5% annually.
OSAM also traces the historical origins of shareholder yield, noting that the world’s first mutual fund, Eendragt Maakt Magt, founded in 1774, incorporated both dividends and share repurchases, reflecting an early form of shareholder yield.
In summary, the article emphasizes that shareholder yield, encompassing both dividends and share repurchases, is a significant factor in identifying companies committed to returning capital to shareholders, and has been associated with superior stock performance.
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