No. of Recommendations: 24
(3 month delayed reply)
"I just think it's supremely stupid of Gurufocus to call that shareholder yield."
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What do you call Shareholder yield? Simple: To anyone sensible, shareholder yield is the rate of stuff going to shareholders. Almost always that means nothing but dividends, though you might count spinoffs and liquidations.
If you own shares of XYZ all this year, and they do buybacks this year,
you don't get that money. Somebody else does. It's not a return on your investment, so it's not sensible to think of it as a yield to owners of XYZ shares.
Every time a company does a buyback, the market cap of the firm falls and the value of a share remains unchanged.*
A lot of very shallow thinkers see the earnings per share going up, somehow without noticing the cash going out the door to people other than the continuing shareholders.
No need for the links, I know what the financial press defines as "shareholder yield". But it's a meaningless number designed by stock brokers who get paid by commissions on selling stock on whatever specious grounds they can get away with, not for doing thoughtful security analysis. It's no more meaningful than adding dividends and capex to get a bigger number than plain dividends.
From a great old article at the FT written by John Smithers:
https://www.ft.com/content/9a3965a0-7c8c-11da-936a..."The FT reports regularly on the views of economists and stockbrokers. Readers might be intrigued by the conflicts between them but they should not be surprised. The purposes of the two groups are completely different. Economists are in pursuit of the truth and stockbrokers of commissions. The first principle of stockbroker economics is that all news is good.
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The second principle is that the stock market is always cheap.
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Data mining is the key technique for nearly all stockbroker economics. There is no claim that cannot be supported by statistics, provided that these are carefully selected.
..."And, one might add, if the usual metrics don't show things to be cheap, just invent a new metric.
Jim
* except in the relatively rare occasion that buybacks are done at prices far from true fair value. More often than not, buybacks are done at prices that are too high, so the buyback is typically a small net
reduction in the value per continuing share. Berkshire is in the minority, where more buybacks are done at lower valuation levels than at high ones and only at relatively attractive levels, so each buyback is a (very very small) increment to the value of a continuing share. It still isn't money going to shareholders, though, so isn't in any way a "yield": it's just good capital allocation, like opening a new store.
