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Summary

  • The Shareholder Yield adds the net buyback and dividend yield to calculate "payments" to shareholders.
  • The companies found in the TOP 10 primarily had higher share buybacks and dividend yields below 2%.
  • Many companies in the TOP 10 have frozen or cut their dividends which has resulted in decreasing a shareholder's total return.

INTRODUCTION

Since I have begun managing my own investments, I have loved reading a vast array of financial literature to help educate myself. The book "The Neatest Little Guide to Stock Market Investing (2013 Edition)" by Jason Kelly was recommended by a blogger that I follow and within its pages I read this interesting concept called "Shareholder Yield". As found in the book:

"According to James O'Shaughnessy's explanation: … To create shareholder yield, you add the current dividend yield of the stock to any net buyback activity the company has engaged in over the prior year. If, for example, a company trading at $40 a share is paying an annual dividend of $1, the company would have a dividend yield of 2.5 percent. If that same company engaged in no stock buybacks over the year, its shareholder yield would equal 2.5 percent, the same as the dividend yield. If, however, the company had 1,000,000 shares outstanding at the beginning of the year and 900,000 at the end of the year, the company's buyback yield would be 10 percent. Adding this to the dividend yield of 2.5 percent, you would get a total shareholder yield of 12.5 percent. This formula allows us to capture all of a company's "payments" to shareholders, and it is indifferent as to whether those payments come in the form of cash dividends or buyback activity. This is important because, like all other things in life, trends come in and out of favor on Wall Street. There are times when buybacks are all the rage, and times when cash dividends are in favor. Shareholder yield captures them both."

The purpose of this article is to see which companies have the best and worst shareholder yields.

ANALYSIS

On March 8th 2014, I used the Gurufocus.com "All-in-One" Screener to screen for stocks with a dividend yield of 0.9% and above, the one year share buyback rate, and stocks traded in Canada and the US.

The Share Buyback Rate regards a positive value as a decrease in outstanding shares from the most recent quarter reported to the same quarter the year before. A negative value means that there has been an increase in outstanding shares.

Below are the TOP 10 companies for Shareholder Yield as well as the BOTTOM 10.

TOP 10

Ticker

Company

Share Buyback Rate (1 Year) (%)

Dividend Yield (%)

Shareholder Yield (%)

(OTC:TMXXF)

TMX Group Ltd

61.50

3.22

64.72

(NYSE:CNI)

Canadian National Railway Co

51.50

1.50

53.00

(NYSE:GNI)

Great Northern Iron Ore

0.00

45.87

45.87

(NASDAQ:OCC)

Optical Cable Corporation

35.10

2.12

37.22

(NASDAQ:VLGEA)

Village Super Market, Inc.

32.80

3.47

36.27

(NASDAQ:HBNC)

Horizon Bancorp Industries

32.00

1.87

33.87

(OTC:AGMJF)

Algoma Central Corporation

29.90

1.90

31.80

(NASDAQ:DGICA)

Donegal Group Inc.

20.40

3.57

23.97

(NASDAQ:WFD)

Westfield Financial, Inc.

19.70

3.11

22.81

(NASDAQ:QADA)

QAD, Inc.

20.20

1.51

21.71

BOTTOM 10

Ticker

Company

Share Buyback Rate (1 Year) (%)

Dividend Yield (%)

Shareholder Yield (%)

(NYSE:NRF)

Northstar Realty Finance Corporation

-64.60

5.39

-59.21

(PBNY)

Provident New York Bancorp

-61.20

1.95

-59.25

(NASDAQ:FBMS)

First Bancshares Inc.

-64.30

1.05

-63.25

(NYSE:WPC)

W. P. Carey Inc.

-68.70

5.40

-63.30

(NYSE:NCT)

Newcastle Investment Corporation

-80.90

12.66

-68.24

(NYSE:PBA)

Pembina Pipeline Corp

-84.70

4.44

-80.26

(NYSE:PKY)

Parkway Properties, Inc.

-87.90

3.50

-84.40

(NASDAQ:NYMT)

New York Mortgage Trust

-140.20

14.27

-125.93

(NASDAQ:BGCP)

BGC Partners, Inc.

-142.10

6.69

-135.41

(NASDAQ:NRCIB)

National Research Corporation

-607.40

1.45

-605.95

There were only two companies in the TOP 10 that are also found in David Fish`s Dividend Champion, Challenger and Contender list [CCC]. These companies are CNI and DGICA. The following NOTABLES show some well-known dividend paying companies from the CCC list.

NOTABLES

Ticker

Company

Share Buyback Rate (1 Year) (%)

Dividend Yield (%)

Shareholder Yield (%)

(NYSE:T)

AT&T Inc.

8.00

5.56

13.56

(NYSE:EAT)

Brinker International Inc.

8.20

1.73

9.93

(NYSE:LLL)

L-3 Communications Holdings Inc.

6.30

1.92

8.22

(NYSE:HRS)

Harris Corporation

5.00

2.18

7.18

(NYSE:XOM)

Exxon Mobil Corporation

4.40

2.65

7.05

(NYSE:TGT)

Target Corp

3.70

2.72

6.42

(NYSE:ITW)

Illinois Tool Works Inc.

4.10

1.93

6.03

(NYSE:WMT)

Wal-Mart Stores Inc.

3.20

2.53

5.73

(NYSE:NSC)

Norfolk Southern Corporation

3.50

2.21

5.71

(NYSE:DE)

Deere & Co

3.10

2.30

5.40

(NYSE:GIS)

General Mills, Inc.

2.20

2.89

5.09

(NYSE:RTN)

Raytheon Company

2.90

2.17

5.07

(NYSE:KMB)

Kimberly-Clark Corporation

2.00

3.00

5.00

(NYSE:CVX)

Chevron Corp

1.50

3.48

4.98

(NYSE:KO)

Coca-Cola Co

1.90

2.91

4.81

(NYSE:BAX)

Baxter International Inc.

1.80

2.90

4.70

(NYSE:RCI)

Rogers Communications, Inc.

0.20

4.28

4.48

(NYSE:MCD)

McDonald's Corporation

1.10

3.31

4.41

(NYSE:CL)

Colgate-Palmolive Company

2.20

2.15

4.35

(NYSE:CSX)

CSX Corp

2.10

2.08

4.18

(NASDAQ:MAT)

Mattel, Inc.

0.10

3.86

3.96

(NYSE:PEP)

PepsiCo Inc.

0.90

2.78

3.68

(NYSE:MDT)

Medtronic, Inc.

1.80

1.84

3.64

(NYSE:PG)

Procter & Gamble Co

0.40

3.07

3.47

(NASDAQ:HAS)

Hasbro, Inc.

0.50

2.92

3.42

(NASDAQ:MSFT)

Microsoft Corporation

0.60

2.69

3.29

(NYSE:LMT)

Lockheed Martin Corporation

0.20

2.98

3.18

(NASDAQ:ADP)

Automatic Data Processing

0.80

2.27

3.07

(NYSE:WAG)

Walgreen Company

-1.10

1.82

0.72

(NYSE:JNJ)

Johnson & Johnson

-2.20

2.83

0.63

As many of the TOP 10 stocks are not well known to me, a brief description of each company is provided below from MSN Money, and Morningstar.

TMXXF

"TMX Group Ltd was formed on April 28, 2011. The Company operates cash and derivative markets for multiple asset classes including equities, fixed income and energy. It also provides clearing facilities, data products and other services to the international financial community. The Company owns and operates two of Canada's national stock exchanges, Toronto Stock Exchange and TSX Venture Exchange." The company began paying a dividend in 2012 and has raised the dividend from $0.40 in 2012 to $1.60 in the last TTM. The payout ratio is 69.89% and the company currently trades with a P/E of 23.00.

CNI

"Canadian National Railway Inc. was incorporated in 1922 by special act of the Parliament of Canada. The Company is engaged in the rail and related transportation business. It transports goods for business sectors, ranging from resource products to manufactured products to consumer goods, across a rail network spanning Canada and mid-America. It's network of approximately 20,000 route miles of track spans Canada and mid-America, connecting three coasts: the Atlantic, the Pacific and the Gulf of Mexico, serving the ports of Vancouver, Prince Rupert (British Columbia), Montreal, Halifax, New Orleans, and Mobile (Alabama) and the key metropolitan areas of Toronto, Buffalo, Chicago, Detroit, Duluth (Minnesota)/Superior (Wisconsin), Green Bay (Wisconsin), Minneapolis/St. Paul, Memphis and Jackson (Mississippi), with connections to all points in North America." The company has paid a dividend for the past 17 years. The previous dividend increase in 2013 from 2012 was 10.1%. The 3 year dividend growth rate [DGR] is 16.6%, the 5 year is 13.9% and the 10 year is 17.4%. The company has a payout ratio of 27.86% and the P/E ratio is at 20.08.

GNI

"Great Northern Iron Ore Properties was incorporated on December 7, 1906 in the State of Minnesota. The Company owns interests in fee, both mineral and non-mineral lands, on the Mesabi Iron Range in northeastern Minnesota. Many of these properties are leased to steel and mining companies that mine the mineral lands for taconite iron ore. The Company owns more than approximately 67,000 acres in various fee interests." GNI does not pay a consistently increasing dividend like many of the blue chip companies, but over the last 10 years has paid at its lowest a dividend of $5.40 in 2009 and at its highest a dividend of $15.00 in 2011. The payout ratio has also been above 70% over the last 10 years and is usually hovering around 100%. The current payout ratio is 101.41%. The P/E is 2.20.

OCC

"Optical Cable Corporation was incorporated in the Commonwealth of Virginia in 1983. The Company is a manufacturer of a range of fiber optic and copper data communications cabling and connectivity solutions primarily for the enterprise market, offering an integrated suite of high quality, warranted products which operate as a system solution or seamlessly integrate with other providers' offerings. Its product offerings include designs for uses ranging from commercial, enterprise network, datacenter, residential and campus installations to customized products for specialty applications and harsh environments, including military, industrial, mining and broadcast applications." The company began paying a dividend in 2010 and has raised the dividend each year starting from $0.01 to $0.08 in 2013. The company reported negative earnings in 2013 and as a result the P/E is -492.91 and the payout ratio is N/A.

VLGEA

"Village Super Market, Inc. was founded in 1937. The Company operates a chain of twenty-nine ShopRite supermarkets, eighteen of which are located in northern New Jersey, eight in southern New Jersey, two in Maryland and one in northeastern Pennsylvania. It is the member of Wakefern Food Corporation, the nation's retailer-owned food cooperative and owner of the ShopRite name. This ownership interest in Wakefern provides the Company many of the economies of scale in purchasing, distribution, advanced retail technology, marketing and advertising associated with larger chains." The company had been paying a consistently increasing dividend since 2004 until 2011 when it was cut by more than 50%. In 2012, the dividend was increased from $0.45 to $0.85 and in 2013 the dividend was raised again to $1.00, which is higher than it was before the dividend was cut. The current payout ratio is 167.25% and has a P/E of 48.22.

HBNC

"Horizon Bancorp Industries is incorporated in Indiana. It is a bank holding company. It provides a range of banking services in Northwestern and Central Indiana and Southwestern Michigan through its bank subsidiary, Horizon Bank, N.A. (the "Bank") and other affiliated entities. The Company operates as a single segment, which is commercial banking. The Bank is a full-service commercial bank offering commercial and retail banking services, corporate and individual trust and agency services and other services incident to banking. The Bank grants commercial, real estate, and consumer loans to customers located mainly in Northwest Indiana and Southwest Michigan and provide mortgage warehouse lines to mortgage companies in the United States." The company has paid a dividend since before 2004 but its dividend was frozen from 2009 to 2010. Prior to that, the dividend was increasingly steadily and since the freeze, the increases have resumed with the increase in 2013 from 2012 being 13.51%. Over the last 10 years, the payout ratio has only once breached over 25% and is currently sitting at 19.38%. The P/E is at 10.15.

AGMJF

"Algoma Central Corporation was incorporated on August 11, 1899. It owns and operates Canadian flag fleet of dry and liquid bulk carriers operating on the Great Lakes - St. Lawrence Waterway. The Company's Canadian flag fleet consists of eighteen self-unloading dry-bulk carriers, six gearless dry- bulk carriers and seven product tankers. The Company operates through four segments, Domestic Dry-Bulk, Product Tankers, Ocean Shipping and Real Estate." The company began paying a dividend in 2008. The company did raise the dividend in 2009 but froze it thereafter until 2012 when the company resumed their dividend increases. The dividend increase in 2013 from 2012 was 27.27%. The payout ratio has always been below 30% and is currently sitting at 28.89%. The P/E is currently N/A.

DGICA

"Donegal Group Inc. is a Delaware Corporation. It is an insurance holding company whose insurance subsidiaries offer personal and commercial lines of property and casualty insurance to businesses and individuals in 22 Mid-Atlantic, Midwestern, New England and Southern states. The Company's insurance subsidiaries and Donegal Mutual provide their policyholders with a selection of insurance products at competitive rates, while pursuing profitability by adhering to a strict underwriting discipline. The Company's insurance subsidiaries derive a substantial portion of their insurance business from smaller to mid-sized regional communities. It has four segments: its investments, its personal lines of insurance, its commercial lines of insurance & and its investment in DFSC." The company has paid a consistent dividend for 11 years. It's 1 year DGR is 3.6%, 3 year DGR is 3.3%, 5 year DGR is 4.5% and 10 year DGR is 15.1%. Clearly, the dividend increases are becoming less sizable. The payout ratio is 56.67% with a P/E of 17.00.

WFD

"Westfield Financial is a Massachusetts-chartered stock holding company and the parent company of Westfield Bank. The Company was formed in 2001 in connection with its reorganization from a federally-chartered mutual holding company to a Massachusetts-chartered stock holding company with the second step conversion being completed in 2007. The Bank was formed in 1853 and is a federally-chartered savings bank regulated by the Office of Comptroller of the Currency. Westfield Bank's deposits are insured to the limits specified by the Federal Deposit Insurance Corporation. The Bank operates eleven branches in western Massachusetts and its primary sources of revenue are income from securities and earnings on loans to small and middle-market businesses and to residential property homeowners. Westfield Bank has been a community-oriented provider of traditional banking products and services to business organizations and individuals, including products such as residential and commercial real estate loans, consumer loans and a variety of deposit products." The company is currently in the midst of its second dividend freeze in the last 10 years. The dividend was frozen from 2007 to 2009 and again since 2011. The payout ratio is currently 77.52% but had reached as high as 203% in 2010. The P/E is currently sitting at 25.00.

QADA

"QAD, Inc., was founded in 1979, incorporated in California in 1986 and reincorporated in Delaware in 1997. The Company is a provider of enterprise software applications and related services and support. The Company provides enterprise software applications for global manufacturing companies mainly in the automotive, consumer products, food and beverage, high technology, industrial products and life sciences industries. More than 2,000 global manufacturing companies use its software." The company began paying a dividend in 2012. In 2013, the dividend was raised by 44%. There has been no announcement as of yet regarding an increase in 2014 making it about a year since the last increase. The payout ratio is high at 143.93% as is the P/E at 84.76.

CONCLUSION

Just because a company has paid a consistently increasing dividend, does not mean that it returns the most to shareholders. This analysis of the shareholder yield has shown that only 2 stocks currently found on the CCC list made the TOP 10. Whereas, some relatively unknown companies among dividend growth investors held the majority in the TOP 10, many have had a history of freezing and cutting dividends which is also detrimental to shareholders who lose income as well as whatever capital gains had been accumulated thus affecting total return. Although there are also other companies that have not paid a dividend long enough to find themselves on the challengers list yet, some are currently on the right track and may become the interest of dividend growth investors in the future. It is interesting to note that the companies found in the TOP 10 with the exception of GNI have aggressively repurchased shares in the last year while their dividend yields tend to be below 2%.

Although the companies in the TOP 10 have a shareholder yield over 20%, it does not necessarily suggest that the company will be able to continue to either aggressively repurchase shares or increase its dividend. More in-depth research into the companies financials and future growth prospects is required and outside of the scope of this article. This is where the OTHER NOTABLES table is important as these companies have shown an ability to consistently increase dividends in good times and down times. These companies also tend to have a balanced approach in increasing their dividends and repurchasing shares.

Readers are reminded that nothing in this article should be construed as recommendation for purchasing or selling any of the companies mentioned in this article. Readers should perform their own research before purchasing or selling any positions in a company and review their own goals and investing objectives.

Source: Shareholder Yield: Are The Companies You're Invested In Investing In You?