When it comes to making money in the stock market, rising stock prices tend to get all the glory. The basic idea is simple: buy low, sell high, and cash in. But I guess it’s worth mentioning that dividends can be a solid alternative. After all, you might often find yourself earning money from your stocks that way.
Invest in gold
If you’re eyeing high-quality stocks or exchange-traded funds (ETFs), dividends can provide reliable income, typically on a quarterly basis, sometimes even monthly. These dividends can bolster your portfolio when stock prices dip.
For those considering a high-quality dividend ETF, you might want to look into the Schwab US Dividend Equity ETF (nysemkt:schd). If you put in $1,000 now, with a bit of patience, who knows where it’ll go?
The saying “Not everything that shines is gold” applies here too. Just because a stock shows a high dividend yield doesn’t mean it’s a good buy. Sometimes, a plummeting stock price indicates poor performance, which might just make it a yield trap.
Choosing SCHD can lessen the risk of falling into those traps, thanks to its eligibility criteria for ETF inclusion. It tracks the Dow Jones US Dividend 100 Index, and companies need to meet certain benchmarks to be a part of it.
These criteria can be excellent for investors; they somewhat lessen the need for exhaustive research into each company within the ETF. Some well-regarded dividend kings (that’s companies with at least 50 years of consecutive dividend increases) include Coca-Cola, Altria, PepsiCo, Target, and Kimberly Clark.
That said, while dividend yields are important, they can shift with stock prices. It’s crucial to focus on yields that dividend-focused ETFs can maintain. As of now, SCHD’s yield sits at 3.7%, which averages around 3.1% over the past decade—roughly three times what the S&P 500 offers currently.
This is an interesting situation to consider: an investment of $1,000 in SCHD yields about $37 annually. Not exactly enough for early retirement, but you know, those numbers can build up over time, especially if you opt for a dividend reinvestment plan (DRIP). This way, dividends earned are automatically reinvested to buy more shares of the ETF.
Plus, SCHD has ramped up its payments by over 160% in the past decade, which is quite impressive. So, investing that initial $1,000 could bear fruit down the line.
The S&P 500 has had its ups and downs since SCHD launched in October 2011, showing an average annual return of 12.4%, while SCHD clocked in around 15%. Even with its shakier performance, those numbers are still pretty appealing for most investors.
It’s worth keeping in mind that past results don’t guarantee future performance. However, if we assume that ETFs maintain an average annual total return of 12%, a single $1,000 investment could grow to over $9,600 in two decades. And adding just $100 monthly could potentially lead to over $96,000. Plus, a low expense ratio of 0.06% keeps more of those gains in your pocket.
So, just something to ponder if you’re considering Schwab US Dividend Equity ETFs.
Motley Fool Stock Advisor has identified what they consider the 10 Best Stocks to consider buying now, and surprisingly, Schwab US Dividend Equity ETFs didn’t make the cut. The selected stocks could yield impressive returns in the coming years.
When could that be relevant? For instance, let’s talk about Netflix. I remember this list starting back on December 17, 2004… If you’d put in $1,000 back then, your investment would now be worth around $661,910! *Then we have Nvidia which was on a list from April 15, 2005… That same $1,000 investment would be a whopping $1,125,504! *
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*Stock Advisor returns as of September 22, 2025
Stefon Walters has a stake in Coca-Cola, which is also suggested by Motley Fool along with Target. For more details, check their Disclosure Policy.
