Catherine Howse, Managing Director at Schafer Cullen Capital Management, joined Julie Cooling, Founder and CEO of RIA Channel, to discuss equity income investment strategies.
The Cullen Enhanced Equity Income ETF (DIVP) focuses on generating high income from equity dividends and option premiums. While the active ETF was launched in 2024, the strategy has been managed in separate accounts for over a decade. The firm’s clients requested an ETF due to its convenience, low cost, and tax efficiency.
The strategy invests in a portfolio of high-quality companies with growing dividends while selling call options on some of the individual stocks. The income earned from covered call strategies can offer income levels competitive with cash and fixed-income products in today’s interest-rate environment.
Investors should evaluate several characteristics before investing in a high-income equity fund. First, it is important to understand the fund’s investment strategy, whether it is investing in an index or an actively managed equity portfolio. Second, does the strategy sell call options on individual stocks or an equity index? Are call options sold on the entire portfolio or only on a portion of the holdings?
An equity income fund focused on quality value stocks can add diversification relative to a portfolio of growth stocks or add some equity upside to a fixed-income portfolio.
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