FYLD Investment Case
Free cash flow has long been emphasized by investors as a key predictor of a company's strength. Companies that pay cash dividends, one indication of strong free cash flow, have historically outperformed the broader market. Focusing strictly on dividend payments, however, misses a second key indicator of strong free cash flow: net share repurchases. The manager believes that a focus on both factors — dividend payments and net share repurchases produces a portfolio of companies that exhibit strong free cash flow characteristics.
The Cambria Foreign Shareholder Yield ETF seeks investment results that closely correspond to the price and yield performance, before fees and expenses, of the Cambria Foreign Shareholder Yield Index. The Index consists of stocks with high cash distribution characteristics. The initial screening universe for this Index includes stocks in foreign developed countries with market capitalizations over $200 million. The Index is comprised of the 100 companies with the best combined rank of dividend payments and net stock buybacks, which are the key components of shareholder yield. The Index also screens for value and quality factors, and for companies that demonstrate low financial leverage.
Why Invest in SYLD
- A Focus on Dividends Alone Misses the Broader Picture - Rather than just focusing on dividend payments alone, FYLD invests in foreign developed stocks that couple strong dividend payments with net share repurchases. The manager believes that selecting companies that show strength in both dimensions is a superior methodology for identifying stocks that possess strong cash flows and that have the potential to reward shareholders with higher yields.
- Classic Value Investment Approach - A long-held pillar of investment success provides that investors should buy the stocks of companies that exhibit strong free cash flows and return that cash to investors in the form of dividend yield. The FYLD portfolio has the potential benefit of investing in classic value companies that are also buying back their stock and reducing their debt.
- Dividend Income - FYLD invests in equities in foreign developed countries to generate income and shareholder yield across numerous market environments. The fund pays a quarterly dividend at the end of each calendar quarter, with the first such payment scheduled for March 2014.
- Diversification - The fund owns a broad portfolio of foreign developed companies of different sizes, industries and sectors, and that are located in different developed countries, providing investors with a diversified equity portfolio. The index employs maximum sector and country percentage caps to ensure that the portfolio is not concentrated in any one sector or in any one country.
- Pioneering Product - FYLD is the first ETF to purchase foreign developed stocks focused on the factors we define as constituting shareholder yield - dividend payments, net share buybacks, and low financial Leverage. The prospectus covering FYLD also lists a future shareholder yield ETF focused on emerging markets (Cambria Emerging Shareholder Yield ETF: EYLD).
- Advantage of Active ETFs - Investors will receive the benefits and flexibility of the ETF vehicle, including the ability to be traded using limit and stop loss orders as well as on margin, intraday pricing, transparency of holdings, lower expense ratio, and a single-share investment minimum, all underlying Cambria's risk-managed portfolio design.
The Cambria ETFs are distributed by ALPS Distributors Inc., 1290 Broadway Suite 1000 Denver CO 80203, which is not affiliated with Cambria Investment Management, LP, the Investment Adviser for the Fund. Check the background of ALPS on FINRA's BrokerCheck.
The Cambria Sovereign Bond ETF was formerly known as The Cambria Sovereign High Yield Bond ETF.
EYLD, FYLD, GAA, GMOM, GVAL, SOVB, SYLD, TAIL, TOKE, TRTY, and VAMO are actively managed using proprietary investment strategies and processes. There can be no guarantee that these strategies and processes will produce the intended results and no guarantee that the Fund will achieve its investment objective. This could result in the Fund's underperformance compared to other funds with similar investment objectives.
ETFs are subject to commission costs each time a "buy" or "sell" is executed. Depending on the amount of trading activity, the low costs of ETFs may be outweighed by commissions and related trading costs. Shares are bought and sold at market price (closing price) not net asset value (NAV) are not individually redeemed from the Fund. Market price returns are based on the midpoint of the bid/ask spread at 4:00 pm Eastern Time (when NAV is normally determined), and do not represent the return you would receive if you traded at other times.
There is no guarantee that the Fund will achieve its investment goal. Investing involves risk, including the possible loss of principal. In addition to the normal risks associated with investing, international investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from social, economic, or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Bonds and bond funds are subject to interest rate risk and will decline in value as interest rates rise.
Investments in sovereign and quasi-sovereign debt obligations involve special risks not present in corporate debt obligations. The issuer of the sovereign debt or the authorities that control the repayment of the debt may be unable or unwilling to repay principal or interest when due, and the Fund may have limited recourse in the event of a default. Investments in commodities are subject to higher volatility than more traditional investments. The fund may invest in derivatives, which are often more volatile than other investments and may magnify the Fund's gains or losses. The use of leverage by the fund managers may accelerate the velocity of potential losses. The Fund employs a "momentum" style of investing that emphasizes investing in securities that have had higher recent price performance compared to other securities. This style of investing is subject to the risk that these securities may be more volatile than a broad cross-section of securities or that the returns on securities that have previously exhibited price momentum are less than returns on other styles of investing or the overall stock market. Investments in smaller companies typically exhibit higher volatility. Diversification may not protect against market loss. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume.
Shares are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Buying and selling shares will result in brokerage commissions. Brokerage commissions will reduce returns.
There are special risks associated with margin investing. As with stocks, you may be called upon to deposit additional cash or securities if your account equity declines.
On June 1, 2020, SYLD’s and FYLD’s investment objective and investment strategy changed. FYLD and SYLD went from being passively managed to actively managed on that same date.
On July 1, 2020, GVAL’s and EYLD’s investment objective and investment strategy changed. FYLD and SYLD went from being passively managed to actively managed on that same date.