Recently, one of StreetAuthority’s most popular newsletter personalities, Nathan Slaughter, sat down for an exclusive interview with one of the brightest up-and-coming minds in finance — Mebane Faber.

If you haven’t heard of Meb before, chances are you will be hearing a lot more about him soon. That’s because Meb has been taking the financial world by storm with his groundbreaking research into an investing concept that is so compelling — yet so simple — that we can’t believe this hasn’t been widely talked about before.

#-ad_banner-#Later in today’s issue, we’re going to share excerpts of that interview with you. You’re sure to find it as fascinating as we have, and with any luck, it might make you a better, smarter investor.

See, both Meb and Nathan are no strangers to the virtues of income investing.

Many of you are likely already familiar with Nathan — he’s been with StreetAuthority for over 10 years and heads up one of the most successful income-oriented newsletters in the country — High-Yield Investing.

Meb has written several bestselling financial books, including The Ivy Portfolio and Shareholder Yield, and was classmates with StreetAuthority co-founder Paul Tracy nearly 20 years ago at the University of Virginia. He recently created the Cambria Shareholder Yield ETF (NYSE: SYLD), an exchange-traded fund with $200 million invested in some of the top performing stocks on the planet.

This new ETF was recently rated by Bloomberg as the “#1 ETF launch of 2013” — and for good reason. Since the fund’s inception last May, it’s handily outperformed the S&P, with 24 of the top 25 holdings at least doubling the S&P’s return as of last November. Some of the fund’s top holdings have gained as much as 105%… 124%… even 224%… in less than a year.

What’s the secret to this kind of success? It’s an idea both Nathan and Meb are passionate about…

See, as Nathan and Meb note in their interview, contrary to popular belief, the best high-yield stocks aren’t necessarily the ones that pay the biggest dividends. While dividends are an important part of the equation, if you really want to find the market’s highest yielders, you need to look at all the ways a company is returning cash to shareholders.

So besides dividends, what are some other ways companies can make shareholders richer? It’s simple — they can buy back stock and pay down debt.

Think about it. Like dividends, both of these activities increase shareholder wealth. Buybacks make a stock more valuable by reducing a company’s average number of shares outstanding. Paying down debt increases the shareholder’s claims on a company’s assets.

By focusing on stocks that engage in these three shareholder-friendly activities, Meb has proven that you can end up with some of the best long-term performers the market has to offer.

He knows this because he’s spent years researching this topic detail. His two books delve into this concept, and needless to say, they’ve caused quite a stir in the financial world.

Simply put, we think Meb is onto something.

In fact, Nathan — and the rest of the StreetAuthority team — feels so strongly about this strategy that we’re putting our money where our mouth is by launching our newest premium advisory. We’re calling it “Total Yield.”

We’ll give you more details on Nathan’s new newsletter in a moment, but first, here are a few snippets from yesterday’s interview… [To watch the full interview, click here.]

Nathan: Can you give us a broad overview of the shareholder yield process? How does it compare to other strategies you’ve tried in the past?

Mebane: A company can do five things with its cash: It can pay out a dividend, it could buy back stock, it can pay down debt, it can go and acquire another business, or it can reinvest in the company. If you’re only looking at dividends, you’re only getting a partial view of the overall picture. So we define shareholder yield as dividends, plus net stock buybacks, plus the debt that a company pays down. We think it’s a much more holistic view of a way a company can distribute cash instead of just dividends alone.

Nathan: Does this strategy work better than just focusing exclusively on dividends alone?

Mebane: It does. And one of the important reasons… we love dividends, but one of the important reasons an investor shouldn’t focus on dividends alone is the mix of how a company pays out its cash has changed since the early 1980s. The SEC passed a rule that allowed companies to buy back stocks. So now in any given year, stock buybacks will be the same or even greater amount than dividends. 

Nathan: Over the last eight months investors have poured more than $170 million into one of your newest funds — the Cambria Shareholder Yield ETF… Can you give us an overview of this fund?

Mebane: So the fund interestingly just got named “Top ETF Launch of the Year” by Bloomberg. So we’re pretty happy with that. What the ETF does is that it selects the top 100 stocks that are based on the shareholder yield measure. Now we have caps on sector, we have caps on minimum liquidity, but in general it gives you a pretty broad allocation to companies that rank highly on our shareholder yield metric. We also do one extra step where we filter out companies that are overvalued, over-leveraged, or have poor momentum. And it ends up with a pretty nice portfolio where you have a dividend yield, “market-like” around 2-3%, but you’re also picking up about a 5-6% buyback yield, so the total yield we’re looking at is really actually around 10%.

Note from editor: As we mentioned earlier, we’re so excited about this new strategy that we’ve decided to devote an entire newsletter to it. It’s called Total Yield, and right now we’re giving readers an exclusive glimpse at some of the top stocks we’ve already uncovered using this method — including one that’s gained an astonishing 247% over the last year. To get the name of this stock — as well as 11 others that are currently posting “total yields” as high as 27.7% — you can view our free research by following this link.