Jeff Cullen

Jeff Cullen has been in the business for over 30 years. He started on a mutual fund sales desk at Paine Webber in New Jersey (now part of UBS), spent years in sales and marketing at asset management firms and broker-dealers, ran product for Bank of America Merrill Lynch across SMAs, ETFs, mutual funds, and insurance, managed some offshore funds, and has been at Schafer Cullen for 13 years. The firm itself is celebrating its 40th year in business, manages $24 billion, and has one investing style: low P/E, value-oriented, with a focus on dividends. Sixty-seven employees, majority focused on research, all pulling in one direction.

On this episode of Behind the Ticker, Jeff breaks down DIVP, the Schafer Cullen Enhanced Equity Income ETF. It's a covered call strategy, but not the kind most investors are used to. The fund buys individual dividend-paying stocks and writes covered calls on those positions, combining dividend income with option premium in a strategy the firm has run as an SMA for 14 years with $1.8 billion in assets.

Not Your Typical Covered Call Fund

Most covered call ETFs in the market write options on an index: the S&P 500, the Nasdaq, whatever the benchmark is. DIVP writes calls on individual stocks in the portfolio. The underlying holdings are 30 to 40 large-to-mega-cap value names selected using Schafer Cullen's discipline: lower P/E stocks compared to their historical norms, dividend yields typically greater than 3%, and demonstrated earnings and dividend growth. This isn't just buying low-P/E stocks with high dividends. The team specifically looks for companies where the P/E is below its own historical average and where earnings are growing.

The options are all short-term: two weeks to one month out, always out of the money between 2% and 4%. The team rinses and repeats every month. By writing on individual securities rather than an index, they can be opportunistic. If energy stocks are up on Middle East headlines today, they might write on energy names to capture elevated premiums. If a tech name reports earnings and implied volatility spikes, they can write on that specific position.

The Income Math

Over the past 14 years in the separately managed account, the dividend yield has averaged 4% to 4.3%. The options premium adds another 3% to 3.5% on top. In aggregate, the total yield has ranged between 7.2% and 8.3% annually. The tax profile is notable: about 55% of the income has come from dividends taxed at qualified dividend rates, and the other 45% from options premium taxed as short-term capital gains.

Jeff noted the team could push the yield to 10% if they wanted, but they'd get called away on positions too often and sacrifice total return. Writing deeper in-the-money calls generates more premium but caps your upside more aggressively. The current approach balances income generation with upside participation. The SMA required a $250,000 minimum per account because writing options on individual stocks requires owning round lots. The ETF eliminates that constraint entirely.

Three Layers of Downside Protection

Jeff described three built-in buffers against market declines. First, the valuation discipline itself: buying low-P/E stocks means you're starting with companies that have less air to come out. Second, dividend income provides a cushion even when prices drop. Third, option premium income adds another layer. The fund doesn't use puts or structured buffers. Jeff said they've looked at those tools but found them expensive and constraining. The three organic layers have worked well historically, especially during current elevated volatility which drives up option premiums and makes the strategy more productive.

He framed the strategy as what a "corner office financial advisor" has been doing for wealthy clients for decades: own large-cap dividend-paying stocks and write covered calls against them. Schafer Cullen just packaged it into a product anyone can access for about $25 a share.

40 Years of One Style

The firm plans to add ETF share classes to existing strategies rather than launching brand new products from scratch. This lets them bring established track records into the ETF wrapper. Jeff was enthusiastic about the ETF community itself: "I've met firms who do what we do, exactly what we do, and we will share information. That doesn't happen a lot in some of the other areas I work with. It's been refreshing."

Key Takeaways

• DIVP writes covered calls on individual dividend-paying stocks (not an index), generating a total yield of 7.2-8.3% annually over 14 years of SMA history: roughly 55% from qualified dividends, 45% from short-term option premium.
• The underlying stock dividend yield has averaged 4-4.3% with options premium adding 3-3.5% on top. Options are two weeks to one month, 2-4% out of the money.
• Schafer Cullen is a 40-year-old firm managing $24 billion with one investment style: low P/E value with a dividend focus. 67 employees, majority research.
• Three organic layers of downside protection: valuation discipline, dividend income, and option premium. No puts or buffers used.
• The SMA strategy has $1.8 billion in assets. The ETF eliminates the $250,000 minimum and makes the strategy accessible to smaller accounts and IRA allocations.

Listen to the full conversation on Spotify, Apple Podcasts, or YouTube.