Why has the WisdomTree U.S. Value Fund (WTV) outperformed? The answer lies in its focus on shareholder yield.

Trailing 5-Year Cumulative Total Returns: 12/31/19–12/31/24

Understanding Shareholder Yield

What is it? Shareholder yield measures how much cash a company returns to its shareholders through dividends and buybacks. It is calculated as:

Shareholder yield = (dividends per share + buybacks per share) / share price

Why does it matter? Companies that return cash to shareholders tend to be more efficient stewards of capital. Companies that consistently pay a dividend and buy back shares, particularly at lower relative valuations, may be less prone to wasting excess cash on low-return investments or expensive acquisitions.

Case Study: General Motors vs. Tesla

To illustrate, consider General Motors (GM) and Tesla:

• As of February 4, 2025, GM returned nearly 16% of its market capitalization to shareholders through dividends and buybacks. This included $653 million in dividends and over $7 billion in share repurchases.
• Tesla, in contrast, issued over $1 billion worth of shares, paid no dividends and conducted no share buybacks, resulting in a slightly negative shareholder yield.

As of February 3, GM was a 1.02% weight in WTV, while Tesla was not included in the portfolio.

Shareholder Yield

For definitions of terms in the table, please visit our glossary.

The Evidence behind Shareholder Yield

Investors are familiar with dividend investing, and research consistently shows that companies with higher dividend yields tend to outperform over the long run.

Less attention is paid to share buybacks, which is another key lever for companies to return cash to shareholders.

The bottom line from the Fama-French research below is straightforward:

• Companies with negative net issuance (companies buying back more shares than issuing) had some of the best returns across all size segments of the market, particularly outside of the largest companies
• On the other hand, investing in companies with the highest net issuance (quintile 5 all the way to the right) had the worst returns of any category

Fama-French Research: 6/30/1963–11/30/2024

Shareholder Yield vs. Price-to-Book

Price-to-book (P/B) has long been a standard metric for evaluating value stocks and is the primary value metric used in the Russell 1000 Value Index.

Over the past five years, the MSCI USA Total Shareholder Yield Index has outperformed the Russell 1000 Value Index by 3.6% annually. During the same period, WTV outperformed the Russell 1000 Value Index by over 500 basis points annually.

This performance demonstrates the effectiveness of shareholder yield as a complementary—or improved—approach to traditional P/B value investing.

Total Returns

Final Takeaway: Why WTV Outperformed

Breaking down the Russell 1000 Index into quintiles based on shareholder yield and P/B reveals:

• The highest shareholder yield quintile (value) consistently delivered better returns than the lowest quintile (growth)
• Conversely, the lowest P/B quintile (growth) outperformed the highest quintile (value)

From 2018 to 2024, the top shareholder yield quintile outperformed the top P/B quintile by 400 basis points annually.

For investors wondering about WTV’s outperformance, the answer is straightforward: its systematic focus on shareholder yield has proven to be a powerful driver of returns.

2018–2024: Russell 1000 Shareholder Yield (SY) Quintile Returns

2018–2024: Russell 1000 Price-to-Book (P/B) Quintile Returns

The shareholder yield focus for WTV is evident in a comparison to the Russell 1000 Value—its current shareholder yield advantage is over 300 basis points, with an average spread of 370 basis points.¹

Shareholder Yield

Without screening explicitly on price-to-earnings, the Fund has a significant discount to the Russell 1000 Value Index on that metric, as well.

A byproduct of finding value companies that are returning cash to shareholders is that these companies tend to be more profitable than other value approaches, as seen by the higher return on equity for WTV.

Characteristics

For definitions of terms in the table, please visit our glossary.

In his book, Stocks for the Long Run, Emeritus Wharton Professor and WisdomTree Senior Economist Jeremy Siegel highlighted that the real (after inflation) return for the U.S. stock market going back to 1802 was just around 7%.

Many investors today are expecting returns significantly below that level, given elevated valuations.

The companies in WTV are returning cash to shareholders at nearly 7%, potentially helping solve a challenge for investors of where to deploy capital in richly valued U.S. equities.

Shareholder Yield

¹As of 1/21/25.