Recent Investment in Schwab US Dividend Stock ETF
I recently made another purchase in my stock portfolio—this time it was the Schwab US Dividend Stock ETF (SCHD). It’s part of my ongoing effort to strengthen my holdings in this popular dividend ETF.
There are a couple of reasons why I find it hard to step away from investing in Schwab’s offering.
Consistent Dividend Income
I’m genuinely fond of receiving dividend income. That regular cash flow? It feels good because it helps you invest more and nudges you closer to financial freedom.
The Schwab US Dividend Stock ETF aligns perfectly with my goal of increasing dividend income. This fund tracks an index, specifically the Dow Jones US Dividend 100 Index, which is made up of high dividend stocks selected based on attributes like dividend yield and a five-year growth rate.
As for the ETF’s performance, it currently boasts a 3.5% dividend yield over the past year. That’s notably higher than the S&P 500, which hovers around 1.1%. This advantage means more passive income for every dollar invested when compared to alternatives that yield less.
On top of that, the fund’s holdings have been steadily increasing their dividends. Over five years, they’ve raised dividends by more than 8% each year, allowing the Schwab US Dividend Stock ETF to consistently provide more income to its investors.
The current strong yield and ongoing rise in income distribution make me optimistic about accumulating even more passive income in the future.
Strong Total Returns
But it’s not just about the dividends. The Schwab US Dividend Stock ETF has a solid reputation for generating attractive total returns, which include both dividends and price increases. Since its debut in October 2011, it has averaged a 12.9% yearly return, delivering over 10% returns annually for the past five and ten years. This year is also off to a promising start.
The fund’s success largely stems from its focus on investing in dividend-growth companies. Data indicates that companies that consistently increase their dividends tend to outperform those that don’t. Over the past 50 years, S&P 500 firms known for dividend growth achieved an average of 10.2% annual returns, significantly higher than non-dividend payers or those who cut their dividends.
Steady earnings growth plays a crucial role in enabling companies to raise their dividends. More profits generally push stock prices higher over time. Because this fund targets companies with strong dividend growth, I expect its value to continue climbing as the earnings and dividends of these companies increase.
Wealth Compounding Strategy
The straightforward strategy of the Schwab US Dividend Stock ETF—investing in 100 high-dividend growth stocks—fits my investment approach perfectly. It not only offers above-average, consistently growing dividend income but also a proven record of double-digit total returns. These compelling factors should accelerate my journey toward financial independence, which is why I keep adding to my position in this top ETF.
