Cambria Shareholder Yield ETF SYLD systematically chooses stocks trading at low valuations with high combined dividend and net buyback yields. This approach favors small-value stocks but also promotes an ever-changing portfolio and high risk, calling into question its ability to carve out a long-term edge. 

This fund is actively managed but uses quantitative rules to fill its 100-stock portfolio. It screens a universe of 3,000 U.S. stocks for those with the best shareholder yield and valuation metrics. Shareholder yield is a measure that aggregates a stock’s dividend yield, buyback yield, and net debt reduction. The objective is to locate companies that return the most cash to shareholders. By incorporating valuation screens as well, this fund filters out firms that trade at high valuations that may not be justified.

Each constituent receives the same 1% weight at each quarterly rebalance and reconstitution. Intraperiod price fluctuations may cause individual holding weights to deviate from their target between rebalance dates. Sector weights are capped at 30% and individual positions at 5% to address rare cases when a stock or sector performs especially well, collecting much more of the allocation than originally intended. This reduces concentration risk until the next scheduled rebalance when weights are reset.

The merits of a shareholder yield strategy are disputed. On one hand, dividend-focused portfolios tend to concentrate in steady value names whose earnings stability can provide a long-term advantage. On the other hand, buyback-focused portfolios back into quality stocks but experience high turnover owing to the opportunistic buyback market. By incorporating both, in addition to net debt reduction, this portfolio can change dramatically over time and centers on value stocks. 

The fund courts considerable active risk relative to the mid-cap value Morningstar Category index and peers. Its shareholder yield and value approach cause sector weights to frequently deviate from the benchmark. These differences have paid off recently but may not continue to be a reliable performance advantage. Additionally, equal weighting recently pushed its average market cap well below the category benchmark and present an additional source of volatility. 

Recent performance of the fund has been stellar, masking its risks. The fund’s Gamestop GME position in 2020 and 2021 contributed greatly to excess returns during those years. Long-term returns still stack up well relative to the Russell Midcap Value Index. The fund outpaced the benchmark by more than 3 percentage points annualized but with higher volatility for the 10 years through June 2023.

Analyst Rating

A high-performing but volatile ETF.

Analyst

Zachary Evens

Victory Capital Holdings

Encore Wire

EOG Resources

Pioneer Natural Resources

Kraft Heinz

Mr. Cooper Group Inc

Plains GP Hlds

Synchrony Financial

Exxon Mobil

Devon Energy

Numerous screens targeting the shareholder yield and value factors translate to an ever-changing portfolio that courts significant risk. These considerations merit an Average Process Pillar rating.

Average

Process

Cambria’s portfolio management team is well-equipped to execute the strategy’s systematic investment process, but it does not stand out against larger competitors. It earns an Average People Pillar rating. 

Co-founder, majority owner, CEO, and CIO Meb Faber is the only named manager on the fund and has been managing the strategy since its inception. Faber leads an investment team of three that includes Jonathan Keetz and Justin Bosch. Keetz and Bosch currently support most of the fund’s day-to-day operations and trading. Keetz, vice president and COO at the firm, joined in 2015 from Brown Brothers Harriman, while Bosch joined in 2019 as a senior analyst. Manager compensation is not tied to fund performance.

Pending a shareholder vote in July 2023, Cambria plans to add Toroso Investments as the subadvisor to their suite of ETFs in a change that will be effective Sept. 1, 2023, according to public filings. Faber will remain as the listed manager on each strategy, and Cambria’s investment team retains full discretion over portfolio construction. Toroso’s team would handle fund operations, execution, and trading. Toroso is a relatively unproven subadvisor that is named on 19 U.S. ETFs totaling $1.1 billion AUM, as of July 2023.

People

Cambria Investment Management is a small, niche exchange-traded fund provider that adequately serves its investors but carries considerable key-person risk, and recent changes raises questions.

Cambria focuses on active, systematic-equity and asset-allocation strategies that differentiate it from larger ETF firms. The firm’s ETF lineup is unique, with a focus on yield-, momentum-, and value-oriented funds as well as more-specific options such as its Cannabis ETF. Few of the firm’s 12 ETFs hold significant assets under management—its largest by far is Cambria Shareholder Yield, with USD 760 million in assets under management. The funds are priced well. Cambria hasn’t merged or liquidated funds but repurposed two since it entered the ETF business in 2013. It has also registered, but not yet launched, additional ETFs, and it’s unclear when they will be available.

Co-founder, majority owner, CEO, and CIO Meb Faber maintains a public profile that drives a notable investor following, underlining considerable key-person risk at the firm. Although Faber is largely detached from the operational aspects of the small firm, he sets the firm’s direction and is one of three investment professionals who support Cambria’s strategies (and serves as their only named portfolio manager). Cambria will add Toroso Investments as a subadvisor to its suite of ETFs effective Sept. 1, 2023. Toroso’s cofounder and CIO, Michael Venuto, had been an independent trustee on Cambria’s three-person ETF board since 2019. Venuto abstained from voting on the Toroso hire and recently resigned from the board. Although Cambria’s choice of Toroso to implement its funds’ portfolio construction is reasonable, the decision nonetheless raises questions.

Below Average

Parent

Cambria Shareholder Yield ETF

SYLD offers active exposure to US stocks with attractive cash flow characterized by dividends, shares buybacks and net debt paydown.

Cambria Shareholder Yield ETF focuses on high-cash distribution companies returning cash to investors through dividends, buybacks, and debt paydown. SYLD targets an equal-weight portfolio of around 100 companies, historically trading at a discount. The strategy considers dividend payments, net share repurchases, and net debt paydown to select companies with strong free cash flow characteristics.

SYLD: Shareholder Yield Provides Outsized Total Return Opportunity

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SYLD is a buy-rated ETF that focuses on companies returning cash to shareholders through dividends, buybacks, and net debt reduction. Global corporate buyback announcements have fallen dramatically, but actual share repurchase activity has increased. SYLD is a value fund with significant exposure to the Energy and Financials sectors, and its technical situation suggests a 'hold' call.

SYLD: A Value-Focused Strategy Worth Sticking With

Cambria Shareholder Yield ETF is an actively managed fund that focuses on shareholder yield and value metrics. The SYLD fund's portfolio consists of 100 stocks, with a significant allocation to energy, materials, and financials sectors. SYLD has outperformed value ETFs in both small and large caps over the past 10 years and in 2023, making it attractive for value investors.

SYLD: Attractive Valuation And Quality

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In June 2020, SYLD switched to an actively-managed fund, and has since become the top-performing ETF with a total market focus, delivering a 117% total return vs. 54% for SPY. SYLD's shareholder yield-focused portfolio currently results in high concentrations of commodity-linked stocks in the Energy and Materials sectors. It's a bet that inflation will run higher for longer. However, I'm not willing to take that bet today. SYLD performance ranks just #76/108 YTD, and it's currently a highly-volatile ETF with a 1.39 five-year beta.

SYLD: #1 For Now, But This Shareholder Yield Fund Looks Vulnerable

The bull market of 2023 has created winners and losers, and investors should focus on areas that can take advantage of the bull market. Cambria Shareholder Yield ETF focuses on companies with strong free cash flow and returns capital to shareholders through dividends, debt pay down, and share repurchases. The SYLD ETF is expensive to own, underperforming the market, and lacks growth prospects, making it unsuitable for investors' portfolios.

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EL SEGUNDO, Calif.--(BUSINESS WIRE)---- $SYLD--Cambria Investment Management, an independent, privately owned investment advisory firm and ETF provider focused on quantitative asset management and alternative investments, today announced Cambria Shareholder Yield ETF (SYLD) has reached its ten year anniversary. "Back in 2013, Cambria's team came up with a different way to look at yield and value,” said Meb Faber, co-founder and CIO of Cambria. “SYLD ranks dividend yield along with net shareholder buyback.

Cambria Shareholder Yield ETF (SYLD) Reaches 10-Year Milestone

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The Cambria Shareholder Yield ETF provides exposure to companies that exhibit high shareholder yields and value characteristics. The fund is very overweight cyclical sectors such as Consumer Discretionary, Energy, Materials, and Financials. In total, cyclical sectors account for 86.8% of the fund.

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SYLD invests in U.S. equities with above-average shareholder yields. The fund sports a cheap valuation, and has outperformed since inception.

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SYLD follows a shareholder yield strategy that takes into account both dividends and stock buybacks. As of June 2020, it is actively managed with an expense ratio of 0.59%. Since the change, SYLD has doubled the performance of the S&P 500. The passive indexing approach wasn't working because SYLD primarily selects value stocks that need to be held longer.

News for Cambria Shareholder Yield ETF ETF (SYLD)