Many top companiesissue an overlooked type of payment back to
their shareholders... They work like traditional dividends, but
with one major difference -- these "dividends" are completely
These under-the-radar "dividends" are a favorite ofWarren
Buffett and many other billionaire investors.
There's a good chance you've received one of these "tax-free
dividends" before and didn't even realize it. That's because
companies don't issue these "dividends" in the normal
They "issue" them by buying backshares of their ownstock .
You see, when a company buys back its own stock, it's similar to
paying you a tax-freedividend . A buyback makes every share you own
worth a larger piece of the company pie, but you don't have to
paytaxes on your new portion of ownership.
On top of that, studies have shown that the share price usually
A study by U.K.-basedinvestment group Shore Capital Group found
thatstocks with the biggest buybacks returned nearly four times
more than thebenchmark FTSE 350Index in the past decade. This index
covers the 350 largest companies bymarket capitalization on the
London Stock Exchange.
Today, I'd like to show you how to purchase a basket of the top
buyback stocks on themarket all at once.
Like its name suggests, the
PowerShares Buyback AchieversETF (
owns a basket of companies that excel in share buybacks.
To be eligible for thisexchange-traded fund (ETF) , a company
must be incorporated in the United States, trade on a U.S. exchange
and must have repurchased at least 5% or more of itsoutstanding
shares for the trailing 12 months. Thefund 's portfolio is
rebalanced on a quarterlybasis .
Right now, the fund's top-five holdings are
Home Depot (
The Walt Disney Co. (
Intel (Nasdaq: INTC)
. Together, these five holdings make up 22% of the fund's overall
This strategy seems to be working. The fund has gained 14% in
the past year and 58% in the past three years.
By focusing on large U.S. companies that continually buyback
shares, the fund is conservatively positioned.
like PKW are perfect if you're the type of investor who wants to
keep things simple with a "buy-and-hold " strategy.
One last tip: For more active investors, looking up the top
holdings in ETFs like PKW or the
Vanguard DividendAppreciation ETF (VIG)
can give you a nice list of stocks for further research.
Risks to Consider:
PKW only yields about 1% and charges a 0.7% annual fee. So
investors eager for moreyield now might do better off byinvesting
in the top five holdings directly.
Action to Take -->
If you're looking for a pure "buyback" play that keeps things
simple, then PKW should be right up your alley. For bargain
hunters, wait for a pullback and purchase shares when they're
selling at a discount toNAV .