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Cambria Launches Foreign Shareholder Yield ETF (FYLD)

Eric Dutram

New ETFs are hitting the market on a pretty regular basis and one of the key themes as of late has definitely been in the income world. In continuing with this trend, upstart Cambria Investment Management has put out another fund focusing on ‘shareholder yield’ giving investors a new option in the income space.

This time, however, the fund will zero in on foreign securities giving access to about 100 non-U.S. based firms that have favorable characteristics on the shareholder yield front. The new fund will trade under the name of the Cambria Foreign Shareholder Yield ETF and the symbol of FYLD, and for those looking for a new option in the foreign ETF market, we have highlighted some key details regarding this new fund below:

FYLD in Focus

FYLD looks to follow the Cambria Foreign Shareholder Yield index, focusing on stocks with high cash distribution characteristics. The initial screen consists of stocks in foreign developed markets that have market caps of at least $200 million (see What Does Your Income ETF Focus On?).

In order to be included in the benchmark, companies must have the best combined rank of dividend payments and net stock buybacks, which Cambria views as key components of shareholder yield. The portfolio manager believes that by focusing on both of these characteristics—while also taking into account financial leverage factors-- investors can tap into companies that have strong free cash flow characteristics which may be poised to outperform.

For this exposure, the fund looks to charge investors 59 basis points a year in fees, putting it a little high when compared to some country ETFs, but certainly not at the extreme either. Current yields are expected to be at least 4%, though the actual payout will be determined in March with the first quarterly distribution.

In terms of the portfolio, it is well spread out among cap levels with mid caps taking the most at roughly 40%, though large caps (34%) and small caps (26%) receive sizable allocations as well. Meanwhile, from a sector look, industrials take the top spot (23%), while financials (18%) and consumer discretionary (14%) round out the rest of the top three (see 3 High Quality Dividend ETFs to Buy This Holiday Season).

Canada and Japan tie for the biggest exposure from a national perspective with 18% each, while Australia (14%) and the UK (10%) complete the rest of the top four. A number of European markets round out the rest of the top 10, suggesting that European stocks will dominate this fund.

"Investors have shown that they are getting smarter about their hunt for yield, and we believe that attractively valued foreign stocks that participate in buybacks and pay out dividends can help meet their need for income," said Mebane Faber, Cambria’s Chief Investment Officer in a press release. "Historically, assessing stocks based on their collective shareholder yield is a strategy that has outperformed vanilla dividend investing.”

How does it fit in a portfolio?

This fund could be a solid pick for investors seeking broad exposure to foreign markets that has a focus on yield. It could also be a good choice for those who believe in the shareholder yield philosophy and that this can produce outperformance.

The ETF might not be appropriate for investors who are looking for the cheapest choice in the space, as its expense ratio is a bit steep compared to some, while trading volumes could be low initially, thus possibly producing wide bid ask spreads. Additionally, the fund might not have the highest dividend payouts thanks to its focus on ‘shareholder yield’ instead of just the pure ‘dividend yield’ (see 11 Great Dividend ETFs).

Competition and Bottom Line

In terms of other products out there in the foreign yield space, the iShares International Select Dividend ETF (IDV) could be a tough foe. This fund has over $2 billion in assets under management, and a 30-Day SEC payout of 4.6%.

Another popular competitor looks to be the SPDR S&P International Dividend ETF (DWX) as well. This fund also has more than $1 billion in AUM, while its yield is even more impressive, coming in at 6.3% in 30 Day SEC terms. Plus, both DWX and IDV have expense ratios that are less than the new Cambria fund, another concerning factor.

Still, despite the heavy competition, there is at least some interest in the ‘shareholder yield’ concept, as evidenced by the Cambria Shareholder Yield ETF (SYLD) and its pretty successful launch. The fund made its debut in May 2013 and it has already amassed more than $150 million in assets under management (see 4 Best New ETFs of 2013).

Given this level of success for SYLD-- in what is also a very crowded market—there is definitely some hope for the foreign version of this fund as well. This will be especially true if this fund can deliver a solid level of income, and if the product can outperform its peers thanks to its more holistic yield approach for foreign markets.

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