№ II — MEASURED
Distribution reliability
Reliability can mean stable aggregate market dividends, stable company-level payments, or stable household cash flow. The historical record below separates those claims and shows where company-level cuts have occurred.
S&P 500 dividend payouts fell ~21% in 2009 — the worst since 1938 (−38.6%); ~74 companies cut or suspended.15
2020: 42 S&P 500 companies (nearly 1 in 10) suspended dividends and 25 cut; Q2 2020 saw 639 US issues cut or suspend — the worst quarter since Q1 2009.16,17
Global dividends fell 12.2% in 2020; one company in eight cancelled its payout entirely; UK payouts fell 41.6% underlying in Q3 2020.18
On the ex-dividend morning the price opens lower by roughly (historically slightly less than) the dividend. A dividend is not interest.4,5
Investors treat dividends as disconnected from price; exact reinvestment happens in ~0.7% of holdings — the free-dividends fallacy, measured.8
The honesty card: US aggregate dividends still rose 2.6% to a record in 2020. Reliability failed company-by-company and abroad — not in the US total.18
When reliability mattered most, the checks were cut — and the price had already told you.
Many individual investors, mutual funds and institutions trade as if dividends and capital gains are disconnected attributes, not fully appreciating that dividends result in price decreases.
Notes on method— formulas, RNG, closed-form cross-checks
Units. Nominal only. Every instrument here compares a strategy against the index under identical draws, so the inflation deflator cancels exactly; there is no real/nominal toggle. Returns are lognormal in log space; geometric inputs convert with ln(1+g).
Y1 — the relabeling machine. Deterministic, annual, per $1. The payer’s share price grows (1+g) then pays a δ dividend; the seller sells the same fraction δ of shares (basis $1/share, never repurchased). Pre-tax terminal wealth is identical to machine precision. Tax: payer τ_d·dividend; seller τ_g·proceeds·(1 − 1/Q). DRIP leg: W ← W·(1+g)·(1 − δ·τ_d); the annual drag is δ·τ_d. Withdrawals and taxes are applied at year end, so the model does not represent intra-year tax timing.
Y2 — covered calls. Monthly. m_mo = ln(1+g_m)/12, s_mo = σ_m/√12. Premium from Black–Scholes with σ_iv = σ_m + vrp, r = g_cash, T = 1/12. Per month the covered factor is (min(G,k) + c)·(1−fee)^(1/12) under the same draw as the index. Live cross-check: E[G] = 1.00673, E[min(G,k)] = 0.98468, P(capped) = 54.9%, premium = 2.08%/mo. MC: 4,000 base → 8,000 effective (antithetic), CRN with the index.
Y3 — leverage. Continuous frontier growth(L) = L·m + (L − L²)σ²/2 − fee(L) − max(0, L−1)·(g_cash + 0.5%), fee(L) = 3bp at 1× else 0.95%. Growth-maximizing L in this continuous approximation: frictionless 3.14, with the stated frictions 1.78. This is an objective-specific model result, not a recommended allocation. Live cross-check: 1× 6.97%, 2× 6.74%, 3× 4.78% per year. The daily-reset truth simulation uses 252 steps/yr, w ← max(0, w·(1 + L·(e^{r_d} − 1) − cost_d)), seed 42, antithetic. Growth-rate: 0.0467 log/yr at 3×.
Gap-risk caveat. Overnight gaps beyond −1/L are not modeled; real leveraged funds can and do terminate. The two-day reset exhibit is exact: +10% then −1/11 returns the underlying to 1.0000 while the 2× fund lands at 0.9818.
Tax constants. Qualified-dividend and long-term capital-gains rates share brackets (0/15/20%, 2025 IRS thresholds); both sliders default to 15%. The model does not select a filing status, account type, state tax, NIIT status, or holding-period qualification. Basis step-up at death per IRC §1014 is relevant only to the no-liquidation comparison. This is a simplified federal-tax illustration, not tax advice.13
Market-data methodology. Product-table figures are computed from dividend/split-adjusted price series and corroborated against totalrealreturns.com and financecharts.com, pinned to their as-of dates.38