Those who have read my dividend-income articles on Seeking Alpha know that I'm a fan of Cambria's Shareholder Yield ETF (SYLD); see this article for an example. I've also written several times recently about diversifying one's portfolio with international ETFs (such as this article). Now Cambria adds a new fund that extends the concepts behind SYLD to the international arena. The fund, called Cambria Foreign Shareholder Yield ETF (FYLD), will follow the Cambria Foreign Shareholder Yield Index which focuses on stocks in foreign developed markets with high cash distributions.
Stocks included in the index have market caps of at least $200M and have the best combined rank of dividend payments and net stock buybacks. As the investor familiar with SYLD knows, Cambria considers these metrics as being the key components of shareholder yield and has presented a very convincing body of evidence in support of that view (see, for example, the entries in Mebane Farber's blog). The index also screens for quality factors that include low financial leverage. This results in an index that taps into companies with free cash flows sufficiently strong to indicate they are well positioned to outperform the broader market.
Mebane Faber and Eric Richarsdon, who also manage SYLD following the same investment principles, manage the portfolio. Naturally, one looks to SYLD for an indication of what to expect. Since its inception in May of 2013, SYLD is up 14%, compared to 9% for SPY over the same period. So, from that limited base, prospects for the fund appear positive.
At the fund's inception yesterday (3 December 2013) its top ten holdings are:
1. Centerra Gold Inc (OTCPK:CAGDF) (Canada)
2. Sankyu Inc. (Japan)
3. Surge Energy Inc. (OTCPK:ZPTAF) (Canada)
4. Kali und Salz Beteiligun (Germany)
5. Rogers Sugar Inc. (OTC:RSGUF) (Canada)
6. Cape PLC (UK)
7. Astrazeneca (AZN) (UK)
8. Kyowa Exeo Corp. (Japan)
9. Homeserve PLC (OTC:HMSVF) (UK)
10. Yokohama Rubber Co. Ltd. (OTC:YORUF) (Japan)
The fund is diversified by cap level with 34% large caps, 40% mid caps and 26% small caps making up its portfolio. Top sectors are industrials (23%), financials (18%) and consumer discretionary (14%).
The largest country exposures are Canada and Japan (18% each) followed by Australia (14%) and the UK (10%). The rest of the top ten comprises a range of European stocks.
Yield is anticipated to run about 4%, but that will not be known with any certainty until at least the first quarterly distribution in 2014.
One expects the fund to compete well with established foreign dividend-income ETFs such as SPDR S&P International Dividend ETF (DWX), which has an impressive yield that runs about the 6% level but has not turned in the overall price performance one might like to see.
As someone who considers Mebane Faber to be one of the more astute observers of the investment world, I'll be watching this one carefully.