On Thursday, Cullen Capital Management entered the ETF space with the launch of the Cullen Enhanced Equity Income ETF fund pursues value and current income through dividends and covered call options. It is actively managed and comes with a net expense ratio of 0.55%.
According to the fund prospectus, DIVP traditionally focuses at least 80% of investments in dividend-paying common stocks. The fund aims to own roughly 30-40 large-cap stocks that have a high dividend yield, while favoring those securities that exhibit strong value characteristics. While DIVP will start out roughly equally weighting its holdings, there are no plans for regular rebalances. Its managers use both qualitative and quantitative approaches when evaluating potential investments, according to the prospectus.
Comparing DIVP to existing dividend ETFs, Schafer Cullen Capital Management Managing Director Jeff Cullen sees DIVP as a unique complement to the other funds in the field. “We don’t try to do a barbell approach of having a couple of huge dividend payers, and then nondividend payers, to try to squeeze in some total return from Google and stuff that doesn’t pay dividends. Everything pays a dividend, and everything has, based on when we buy it, it’s a 3% dividend or higher,” he told VettaFi.
DIVP Offers Unique Methodology
A key component of Cullen Capital Management’s strategy is to seek dividend growers. “We want dividend growth, which if you’re just chasing yield, you’re going to be in REITs, and utilities and staples, where having that dividend growth, we have tech, we have consumer discretionary. It allows for a more broad-based exposure to all the sectors, which aids us when we write the options,” Cullen added.
Additionally, DIVP plans to strategically implement covered call options on roughly 25%-40% of the fund’s portfolio. Through combining covered call premiums with equity dividends, DIVP offers a unique methodology for reaching higher income potential.
“Cullen has decades of expertise in actively selecting undervalued companies with strong dividend records,” explained Todd Rosenbluth, head of research at VettaFi. “This will be a clone of its mutual fund and separately managed accounts. We think it could complement more growth-oriented covered call ETFs.”
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