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.
Deeper Dive: Insights from the Full Conversation
Beyond the headline strategy, the full conversation between Brad and Jeff Cullen covered several additional themes worth highlighting for advisors and investors.
On Process and Philosophy
And then we want to see is dividend growth and that particular stock coming from the earnings growth in a company. We don't want them to do fancy financial engineering and borrow debt in order to fuel a fund a dividend payment. We want that combination of three low PE dividend yield and dividend growth. So once though and then you want to diversify portfolio. Because if you're writing options on only two sectors, right? If your valuation brings you to owning say staples, utilities and energy, then that means I have to write or the team has to write options only in those three options.
So for example, we're not going to compare utility to a technology stock for PE ratios. It's going to be XYZ stocks. The historical PE ratio is 25 and right now it's trading at 18 with this market correction. And the dividend yield is now 3.4% or something like that. That becomes attractive to us. We want to see earnings growth from the company. We want to see expansion. We want to see reasons why the earnings are going to rise.
Market Context and Positioning
And now they're getting access to some of these other column income-producing ETFs that can generate good yield for them. But I think they're starting to see that there's actually underlying holdings that could be volatile out in there. So for us, I think this works great for anyone that needs income. And they are okay with some equity volatility from household, large cab value, dividend names. Because look at the breadth. These stocks are going to go down with it.
We're going to look for a dividend yield probably greater than 3%. It's usually about 3% or higher we want a dividend yield. But we also want dividend growth, right? So we don't want to buy just low yielders and high dividend. I'm sorry low PE ratio stocks and high dividend yielders. You're going to wind up in just like utilities or some energy. What we look for is a combination of the three. We want lower PE stocks compared to their historical norm.
There's a bit of a push toward conservative value investing from the go-go growth that's been on the Nasdaq and the S&P. And that creates a good blend. And the way I like it, is our firm is a value-oriented investment. So we manage non-cover-call option strategies as well. And we're often used as a blend with a growth manager for our financial advisors that have used us for decades. And that's how we're reviewing the same thing. While many of the popular ETFs that you cover call writing today, they tend to be S&P 500-oriented or Nasdaq-oriented.
Notable Insights
"The reality is the underlying names in the 30 to 40 stocks we own."
"And that's why writing one month options gives us that flexibility."
Key Takeaways
- 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.
- 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 conversation explores important themes in options strategies relevant to today's advisor landscape.
What This Means for Advisors
For financial advisors evaluating options for client portfolios, this conversation with Jeff Cullen highlights important considerations around fixed income. Understanding the strategy behind each fund—not just the ticker—helps advisors make more informed allocation decisions and better communicate the rationale to clients.
The themes of fixed income and income investing discussed in this episode are particularly relevant in the current market environment, where advisors are increasingly looking for differentiated solutions that go beyond traditional benchmarks.
Listen to the Full Episode
This article is based on an episode of Behind the Ticker, hosted by Brad Roth, Founder and CIO of THOR Financial Technologies. For the full conversation with Jeff Cullen, including additional nuances and details, listen on Spotify, Apple Podcasts, or watch on YouTube.