However, during the withdrawal phase a regular market capped index is less suitable as an investment vehicle.
Why? I think this statement is completely false. You wouldn't want it by itself. You would likely want some international exposure and bond exposure, but you could still use index funds for that.
Something like VTI pays dividends, but it is invested in thousands of companies so it is very well diversified. Some of them pay dividends, some don't, some are big, some are little, some are healthcare, some are utilities, some are tech, etc. It is diversified. The non-dividend paying growth companies will hopefully give you long term growth and you can pull from that just as easy as a dividend.
Oh, and SDIV may pay high dividends, but it has underperformed VTI over the past 3 and 5 year periods... by A LOT! Quoting both as of 9/30(I didn't cherry pick the date, it's the date reported on both websites):
VTI is 10.42% for 3 years and 16.33% for 5 years.
SDIV is 4.56% for 3 years and 8.99% for 5 years.
Oh, and if the annual returns during a bull market are less than the dividend yield that would imply that the companies within the fund are going down in value. Total return - income return = capital return. 4.56 - 7.49 = -2.93%. These companies might have really high dividend yields not because the dividends went up, but because the value of the stock dropped.
I looked through the holdings and I didn't do any in depth analysis, but my back of napkin conclusion is that is concentrated in small no-name banks, small no-name investment firms, mortgages, and property management companies. It didn't exist in '08, but if we had another banking crisis I wouldn't want to own this.
I'll stick with VTI. ;)