I have 1/3 of my portfolio in a high income strategy - and yes I have read ERN and fully aware of how miserably the yield shield performed in the last bear market, but history doesn't have to repeat itself - at least not without making the alternative argument first - and it could easily be that it will perform better than a TR strategy over the next wobbly patch.
Assumptions I make? Hmm, not too many that are radically different to having a TR strategy, actually. Ultimately dividends are just one way for a company to return money to its shareholders.
- I don't necessarily assume my long term returns are going to be higher
- I don't assume that dividends won't be cut or that the stream can't fall
- I don't assume that that either capital growth and especially dividend growth will match inflation (though I do hope that it will)
So why do I do it? Simply, as many others, I like to compartmentalize the asset base from its cashflow, and an income strategy is well suited for this. Ultimately I want my income portfolio to - in most years - be able to meet my lean-FIRE required level of income. So that's the income only from 1/3 of my total investments without touching the principal - very conservative.
I would also say that, while standard FIRE practices is based around TR and doesn't really care about separating income and principal, that is a very US-centric view where capital appreciation is more lauded. In most other countries we like to make a clearer distincting between the asset and the cashflow, and a lot ex-US stocks are more willing to pay out their income as dividends.
