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Do-It-Yourself High-Dividend Strategies

Generating a high return on capital while not risking the return of capital

Nicolas Rabener
10 min read
20 Nov 2023

SUMMARY

  • Most high-dividend strategies trade income for capital returns
  • Investors can create dividends synthetically by simply selling their shares
  • More tax-efficient and avoids poorly performing stocks

INTRODUCTION

What do business development companies (BDCs), covered call and preferred income strategies have in common?

Most obviously, they all offer dividend yields well above those of the S&P 500 and are especially popular among yield-hungry retail investors. Less obviously, all these strategies have underperformed the S&P 500 on a total return basis over the long term. Put another way, dividend investors are trading capital for income (read BDCs: Better Don’t Choose?

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