Picking stocks with high dividend yields is a time-tested strategy. Yet picking stocks with high shareholder yields can be a better bet.

Exchange-traded funds like Schwab US Dividend Equity and Vanguard High Dividend Yield, and strategies like the Dogs of the Dow -- which calls for buying the 10 highest-yielding stocks in the Dow Jones Industrial Average -- offer contrarian value-oriented strategies that could pay, well, dividends over the long run.

There's just one problem: Focusing on dividends includes only one form of capital returns. Companies have other ways to put cash in shareholders' hands, including debt paydowns and stock buybacks -- and the latter, in particular, is too important to ignore. Total shareholder yield, a metric that combines dividends and share repurchases, provides a better picture of a management team's overall capital-return strategy.

Take General Motors. While its stock yields just 1%, the company has bought back almost $8 billion worth of its stock over the past 12 months, 14% of the current market value. Add them together, and GM's total shareholder yield is 15%. But focusing on yield isn't enough -- the buybacks should be coming out of net income. That isn't the case with GM, which has returned about $8.4 billion to shareholders over the past 12 months but produced only $7 billion in net income. While GM's balance sheet appears fine, borrowing money to buy back stock can be a risky idea.

We prefer the 10 stocks in the S&P 500 with the highest shareholder yield but also the net income to cover the payouts: Comcast, Molson Coors Beverage, General Mills, Kraft Heinz, printer maker HP, U.S. oil-and-gas producers Devon Energy and EOG Resources, home builder Lennar, oil-services company Halliburton, and resin and synthetic fiber maker Eastman Chemical.

It's a solid group of stocks. Their average dividend yield is about 4%, more than three times the S&P 500's 1.2%, while total shareholder yield is north of 9%, three times the S&P 500's 2.8%. The stocks also look cheap -- they trade for about 10 times estimated 2026 earnings, less than half the S&P 500's 22 times. Their problem is capital gains: Through last week, shares of the group were down an average of 14% year to date, while the S&P 500 has gained 13%.

That shouldn't surprise anyone who has been watching the stock market this year. Investors want artificial intelligence -- and only artificial intelligence. The Magnificent Seven stocks now account for roughly one-third of the market value of the S&P 500, and that group's dividend yield is 0.2% and its shareholder yield is 1.5%, helped by some $155 billion spent on share repurchases over the past 12 months by Apple and Alphabet. Nor is this a recent phenomenon: The MSCI USA Total Shareholder Yield Index has trailed the broader MSCI USA Index by almost two percentage points a year for the past 10 years.

But the more AI stocks run, the better the 10 shareholder-yielding dogs look, with their low valuations and management teams dedicated to returning capital to owners. Eventually, things normalize, and it pays to remember that the MSCI USA Total Shareholder Index has beaten the total MSCI U.S. index by a nose since 1999. Falling interest rates could serve as a catalyst, making higher yields look relatively attractive, as could the popping of the AI bubble.

"We've been beaten up every time we try to pivot to value, so when the heck is the market going to let value investors have their day in the sun?" says Research Affiliates founder Rob Arnott. "The short answer to that is, I don't know, nobody knows, but if it's cheap enough and you're patient, the long-term inevitable outcome is superior performance."

Investors don't have to pick stocks to get shareholder yield. The WisdomTree U.S. Value ETF has a shareholder yield of close to 7%, higher than the roughly 4% shareholder yield of the Russell 1000 Value index. The Cambria Shareholder Yield ETF selects stocks based on dividends, share repurchases, and debt reduction, and has a shareholder yield of about 3.5%.

As for generating income, stock buybacks should result in higher share prices. The value of the company is unchanged, but total shares outstanding are reduced. Income-seeking investors can sell when they need cash, which shouldn't be a problem given that both qualifying dividends and long-term capital gains are currently taxed at a top 20% rate.

For long-term investors interested in income, there is rarely a bad time to buy quality stocks returning cash to shareholders at reasonable prices.