SCHD: A Standout Dividend ETF Offering Steady Growth

For dividend investors seeking a reliable source of income and consistent dividend growth, the Schwab U.S. Dividend Equity ETF (SCHD) has made a name for itself in the investment community. The exchange-traded fund targets the Dow Jones U.S. Dividend 100 Index, aiming to reflect its performance while offering tax efficiency, which is particularly appealing to investors looking for portfolio distributions.

A Popular Choice Among Investors

SCHD has garnered popularity for its combined high total return and affordability, boasting a low expense ratio of 0.06%. This means you'd only pay $60 in fees for a $10,000 investment. Moreover, SCHD has demonstrated impressive dividend performance with a 13.05% compounded annual growth rate over five years, which is appealing to those seeking a steady income from their investments.

Investment Strategy and Holdings

With passive management, SCHD holds 104 companies with stable dividends, including top players like Broadcom, Home Depot, and PepsiCo, among others. To qualify for SCHD, firms must have at least ten years of continuous dividend payments, a market capitalization above $500 million, and meet liquidity requirements. Additionally, strong dividend histories and low payout ratios signal potential for future dividend increases.

The Dividend Story

The ETF pays an annual dividend of $2.66 per share, which translates to a yield around 3.5%. Despite interest rates on savings accounts potentially being higher, SCHD's track record of increasing dividends—for 12 consecutive years and by 110% over the past five—promises continued dividend growth.

Considerations on Technology Sector Exposure

SCHD's conservative strategy means it has less exposure to the fast-growing technology sector. While this aligns with the fund's focus on dividend yield and stability, it may mean missing out on the potential gains from this dynamic market segment. However, not every investor prioritizes capital appreciation over dependable dividend yields.

Conclusion

SCHD stands out as a viable choice for investors who place a high value on dividends and total return. It's particularly attractive for those just starting out with dividend investing or looking for a reliable cornerstone for their portfolio. While the technology exposure is limited, the benefits of consistent and growing dividends cannot be overlooked.

SCHD, dividend, ETF