Do-It-Yourself High-Dividend Strategies

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

November 2023. Reading Time: 10 Minutes. Author: Nicolas Rabener.


  • 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


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? and Covered Call Strategies Uncovered.

Do investors need to accept lower returns in exchange for high dividend yields? No, they do not. In fact, do-it-yourself (DIY) high-dividend strategies can generate enviable income without sacrificing capital.


The Global X SuperDividend U.S. exchange-traded fund (ETF, DIV) is our proxy for a high-dividend US stock portfolio. The ETF has a 10-year track record, manages more than $600 million in assets, and charges 0.45% in fees per year. It is composed of 50 equal-weighted high-dividend-yielding U.S. stocks that paid dividends consistently over the last two years and are less volatile than the U.S. stock market.

Given its portfolio composition and positive exposure to the value, low volatility, and size factors as well as negative exposure to quality, the Russell 1000 Value Index serves as the benchmark. The dividend yield of DIV is 6.3% compared to 2.0% for our Russell 1000 Value Index proxy, the iShares Russell 1000 Value ETF (IWD).