Enhanced Equity Income: Dividends + Options | Jeff Cullen

In a recent episode of Behind the Ticker, Jeff Cullen, Managing Director at Schafer Cullen Capital Management, sat down to discuss the firm’s first ETF, the Cullen Enhanced Equity Income ETF (ticker: DIVP). With over 30 years in the asset management industry and experience across mutual funds, SMAs, and ETFs, Cullen provided a deep dive into how the firm’s long-standing dividend-focused value strategy evolved into an actively managed ETF. Schafer Cullen, which manages over $24 billion in assets, has built a reputation over four decades as a value manager with a strong emphasis on dividend-paying stocks, and DIVP represents a natural extension of that philosophy.DIVP is a high-conviction, actively managed strategy that holds 30 to 40 large-cap, household-name value stocks with above-average dividend yields—typically above 3%. What sets DIVP apart is its selective covered call overlay, where the team writes short-dated, out-of-the-money call options (typically 2–4% out and expiring in two weeks to one month) on about 25–40% of the portfolio. The calls are written on individual stocks, not an index, and are chosen based on market volatility and the underlying fundamental outlook of each holding. This approach allows the portfolio to enhance income without significantly capping upside potential, thanks to thoughtful partial-position writing and sector diversification.Cullen emphasized that the ETF is designed to deliver two sources of income—dividends from quality value stocks and call option premiums—leading to a historical yield between 7.2% and 8.3% in the SMA version of the strategy, with more than half of that coming from qualified dividend income. The strategy is intended for investors seeking higher income with equity market participation and downside resilience. While the ETF may underperform in sharp bull runs or during periods of low volatility, it performs particularly well in sideways or volatile markets where premium harvesting and dividend yield can shine.Cullen also shared his enthusiasm for entering the ETF space, highlighting the structural benefits of the ETF wrapper, including tax efficiency, ease of implementation, and the ability to reach a broader set of advisors and investors. He noted that Schafer Cullen plans to expand its ETF offerings, potentially via ETF share classes of existing mutual funds, depending on upcoming SEC rulings.Get Brad's daily market research: Subscribe to The Signal at thorft.com/newsletterMore episodes: thorft.com/podcast