Financial advisors have spent much of the past few years helping clients manage expectations around eye-catching returns from growth stocks and the Magnificent Seven. Now, with volatility returning and valuations stretched across major indices, those conversations are evolving. Clients who enjoyed the run-up are asking tougher questions about downside exposure, and advisors are taking a fresh look at strategies that balance income consistency with risk mitigation.
The Cullen Enhanced Equity Income ETF (ticker: DIVP) addresses both concerns through a disciplined approach to value investing combined with selective options overlays. Catherine Howse, Managing Director at Schafer Cullen Capital Management and a registered representative of Paralel Distributors LLC, believes the current environment creates an opportunity for advisors to reposition portfolios before the next downdraft catches clients off guard.
“Sometimes I feel like the retail investor can be a little bit late to be thinking about risk,” Howse tells The Wealth Advisor’s Scott Martin. “We’ve been spoiled for the last couple of years by market returns, but we’ve been given these opportunities to see how these types of risk-mitigating strategies hold up well.”
Building Consistency Through Multiple Income Streams
DIVP’s design creates three distinct but reinforcing sources of income: dividends, option premiums, and the fundamental strength of its underlying value stocks. The ETF invests in large-cap companies with sustainable dividend payments, then writes covered calls on 25–40% of the portfolio to add premium income. Cullen has run the approach in a separate account format for 14 years; the ETF launched in March 2024.
“The great thing about the strategy we have, DIVP, is that it builds that consistency, having an income stream through dividends and option income,” explains Howse. “But given that the underlying portfolios are rooted in fundamental value, consistent dividend payers, dividend growth, when we get into these choppy moments in the market, they hold up quite well.”
Cullen’s value discipline stands out in a landscape where definitions have drifted. Passive value indices now often include some Mag Seven names— Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla—and many managers have moved toward blend or core categories. Meanwhile, Cullen stays anchored.
“At Cullen, we are very strict about what we do, and it’s because it’s rooted in so much empirical research that we have that we know sticking to this kind of knitting and doing that consistently over the long term,” Howse notes. The firm focuses on companies trading at low price-to-earnings (P/E) ratios with strong prospects for long-term earnings growth—an approach she characterizes as “old school Ben Graham style of investing.”
The emphasis on dividend growth helps avoid value traps—companies offering high yields because fundamentals are deteriorating. Management teams dig into cash flow durability to determine whether payouts can rise over time rather than simply hold steady.
“A lot of real work goes into that underlying portfolio before we even consider where we are going to write calls on these stocks to generate some additional yield,” Howse says. “The dividend piece is also super important.”
The Options Overlay: Income Without Abandoning Upside
Covered call strategies have proliferated in the past five years as investors look for yield. Many, however, rely on approaches that can undermine long-term return potential. Some write calls on high-momentum names, effectively capping the upside investors bought the stocks for. Others maintain large distribution rates only by gradually selling down their portfolios.
“This group has grown probably fourfold over the last five years because clients love income, but to be able to deliver consistent income takes more of an experienced manager and a process around that,” says Howse.
Cullen’s selective overlay—writing calls on only 25–40% of holdings at any time—is designed to preserve meaningful equity participation while seeking to generate premium income. The team evaluates where options can enhance return potential without compromising the role each stock plays within the portfolio.
“When you look at these covered call portfolios, you can get really enticed by a lot of the distribution yields that are published, but if their total returns don’t match up with what they say they can deliver for you, there’s definitely a break in that,” Howse observes. The fund’s 12-month trailing distribution rate stood at 7.50% as of November 30, 2025, supported by both underlying dividends and option premiums.
As interest rates potentially move lower, DIVP’s structure may become more valuable for advisors seeking reliable income. Bond-heavy allocations might feel pressure, and equity income strategies that rely on sustainable dividends can provide another lever.
Volatility Creates Opportunity for Risk Mitigation
Recent turbulence has made clear how quickly markets can move. Howse points to April’s “Liberation Day” volatility and more recent swings as reminders of why risk-mitigation matters. Value-oriented holdings with sustainable cash flows tend to decline less sharply than growth stocks trading at premium valuations.
“In these moments of heightened volatility, you definitely see an investor shift towards looking for more of these strategies that can offer a cushion,” she notes. While the shift often comes too late, after drawdowns have already occurred, advisors who position portfolios proactively can help clients avoid the worst outcomes.
Artificial intelligence spending, geopolitical uncertainty, and evolving monetary policy all contribute to a market that reacts faster and swings harder than it did even a few years ago.
“It’s important to have a plan in place to be able to absorb some of these declines because things move faster,” Howse explains. “The declines are deeper; the rebounds are stronger. I think that advisors need to start thinking in that direction.”
Modern markets move differently than in the past, and portfolio construction needs to account for the new reality. The speed and magnitude of market movements reflect structural changes likely to persist. “Uncertainty is going to be a part of our world going forward,” she says. “There’s always a wall of worry to climb, but it seems that with where we are today around everything around artificial intelligence and the spending and the demand that’s going to be needed to match that in the years ahead, there’s likely to be more volatility going forward.”
Valuation Concerns Drive Interest in Active Management
With the S&P 500 trading at roughly 22 times earnings—well above historical norms—advisors are increasingly cautious about adding exposure at current prices. Clients sense the tension too, even if they don’t frame it in valuation terms.
DIVP’s focus on companies trading near 15 times earnings can provide an alternative. The fund looks for businesses with durable competitive advantages, strong balance sheets, and steady long-term earnings potential. Active stock selection allows the portfolio to avoid overvalued names while maintaining quality standards.
“One of the concerns that we have is how expensive the market’s been for a while,” Howse says. “So, having income as a greater piece of your total return is, I think, an important factor to consider.”
If markets move sideways or decline modestly, income becomes an even larger share of total return. Strategies that rely entirely on price appreciation risk coming up short in those environments. Meanwhile, strategies generating consistent income may help smooth performance and the client experience.
Avoiding the Coverage Call Pitfall
Many covered call ETFs write options on the same high-growth stocks investors own for upside potential. When those upside opportunities are capped, the strategy can work against investor intentions.
“A lot of them own those Mag Seven stocks, and they’re writing options on them,” Howse points out. “I find it really interesting because the reason you would want to own those companies is for the upside, not for the income.”
Highly valued growth stocks can also fall sharply during selloffs, limiting the defensive characteristics covered call strategies are supposed to offer.
“Some of those under outlying holdings have some of the more high P/E names that, in these declines, can swiftly go down and not deliver on that sort of downside lower volatility that a covered call strategy should deliver for you,” she adds.
DIVP aims to avoid the mismatch. The trade-off of capping upside for premium income makes more sense with value stocks, where the expected return profile already centers on steady income and moderate appreciation. Advisors can blend DIVP with growth holdings to strike a more balanced portfolio without relying on a single fund to do everything.
“Talking about maybe splitting that trade a little bit more with a DIVP to complement it, some consistent income, I think that’s a great idea as we think about going into 2026, to be able to also think about the interest rate environment probably going down further and having ways to have other sources of income,” observes Howse.
Patient Capital in an Impatient Market
Value investing requires tolerance for periods of underperformance as market sentiment chases growth and momentum. The past several years have tested that patience severely, as concentrated gains in a handful of technology stocks dominated returns. Advisors who maintained value exposure often found themselves explaining relative underperformance to frustrated clients.
Market conditions may be shifting in value’s favor. As volatility increases and valuation spreads widen, the case for patient capital strengthens. Companies with sustainable cash flows, reasonable valuations, and growing dividends offer compelling risk-adjusted returns without requiring investors to make aggressive growth forecasts.
“That’s truly the way to build wealth: be patient and do it over time,” Howse emphasizes.
The same message lands very differently now compared to 18 months ago, when growth stocks seemed poised to defy gravity indefinitely. Clients who experienced sharp drawdowns in concentrated positions may prove more receptive to strategies that forgo some upside for reduced volatility.
DIVP launched in March 2024 and had $37.8 million in assets under management as of November 30, 2025, a modest start that reflects both the fund’s newness and the challenging environment for value strategies. The 0.55% expense ratio might make the fund accessible for advisors seeking to implement income-focused sleeves without high cost drag.
Positioning for 2026
As advisors review portfolios heading into 2026, they’re weighing potential rate cuts, stretched valuations, inflation concerns, and geopolitical tensions. DIVP seeks to navigate the environment through fundamental stock selection, dividend sustainability analysis, and selective options writing. While it doesn’t attempt to eliminate volatility, the strategy aims to produce more consistent returns than pure growth exposure or passive value indices.
As of November, the fund held 39 positions across sectors including healthcare (17.8%), financials (17.1%), and industrials (10.1%), with top holdings like Medtronic, Merck, and Cisco representing the type of established, dividend-paying companies Cullen favors. Monthly distributions provide regular income that fluctuates based on market conditions and the options premiums captured during each period.
Advisors need strategies that work across multiple scenarios. DIVP seeks to offer income generation, downside cushioning, and equity participation in a single structure—built on more than a decade of institutional implementation before migrating into the ETF format. While no strategy fits every client or every market backdrop, the combination of disciplined value investing and a selective options overlay can represent a thoughtful response to clients who want to protect gains while staying invested.
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Additional Resources
- Contact: Jeff Cullen, Jeffcullen@schafer-cullen.com
- Cullen Capital Management Website
- DIVP Fact Sheet
- DIVP Summary Prospectus
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Disclosures
Investing involves risk. Principal loss is possible. Foreign investments involve additional risks, which include currency exchange-rate fluctuations, political and economic instability, differences in financial reporting standards, and less-strict regulation of securities markets. The Fund may invest in derivatives, which are often more volatile than other investments and may magnify the Fund’s gains or losses. Derivatives are also subject to illiquidity and counterparty risk.
To determine if the Funds are an appropriate investment for you, carefully consider the investment objectives, risk factors and charges and expenses before investing. This and other information can be found in the Funds’ summary and full prospectuses, which may be obtained by calling 1-833-4CULLEN. Read it carefully before investing.
The Cullen Enhanced Equity Income ETF is distributed by SEI Investments Distribution Co. (SIDCO). Cullen Enhanced Equity Income ETF is managed by Cullen Capital Management. SIDCO is not affiliated with Cullen Capital Management.
Neither Cullen Capital Management, SIDCO, nor their affiliates provide tax advice. Please note that (i) any discussion of U.S. tax matters contained in this communication cannot be used by you for the purpose of avoiding tax penalties; (ii) this communication was written to support the promotion or marketing of the matters addressed herein; and (iii) you should seek advice based on your particular circumstances from an independent tax advisor.
