Dividends can play a crucial role in enhancing investors’ returns, often proving to be more dependable than the unpredictable nature of capital gains. Maybe that’s why a lot of people in the market tend to focus on strategies aimed at generating income.
If this sounds like you and you’re considering the stock market, there are multiple options to explore. If you find yourself with $2,000 to invest and it’s not earmarked for any immediate bills or debts, there’s one dividend exchange-traded fund (ETF) that could be worth your time.
Strong dividends with minimal fees
One ETF to look into is the Schwab US Dividend Stock ETF (SCHD). It tracks the Dow Jones US Dividend 100 index and includes a diverse selection of 100 stocks in its portfolio.
However, not all companies make the cut for this ETF. Stocks enter based on specific financial criteria, such as earnings and debt. Only those that have consistently paid dividends for at least a decade can qualify, and the companies also need a market cap exceeding $500 million.
The selection is further refined by evaluating stocks against four key financial metrics to determine their ranking: first, the cash flow to debt ratio; second, return on equity; third, dividend yield; and fourth, the five-year dividend growth rate. The top 100 fit into the index.
The Schwab U.S. Dividend Stock ETF boasts a trailing 12-month dividend yield of 3.29%. In fact, quarterly dividends have shot up by 143% over the past ten years, promising greater income in the future. Plus, the expense ratio is quite low at just 0.06%.
This ETF’s main holdings are established companies known for their stable earnings and solid industry standings. These firms are in a good position to maintain their dividend payouts.
The current market situation boosts this ETF’s appeal
For potential investors, performance usually tops the list of concerns. The Schwab U.S. Dividend Stock ETF certainly excels here, having delivered a total return of 229% over the past ten years (as of June 8th). By 2026, it recorded a total return of 19%, which markedly surpasses the 8% average seen in the S&P 500 index.
These days, investors have plenty to worry about—geopolitical issues, inflation, the potential impact of artificial intelligence, and high consumer debt all contribute to rising anxiety. Yet, the Schwab U.S. Dividend Stock ETF has proven to perform admirably during periods of high market uncertainty and volatility.
Amid discussions about the S&P 500, one recurring critique revolves around stock valuations. It’s essential to note that numerous factors influence stock prices. Should there be a market correction or bear phase, the Schwab U.S. Dividend Stock ETF is likely to weather the storm more effectively.
This could serve as a valuable addition to diversifying your portfolio. Even a $2,000 investment can offer peace of mind, knowing you hold an ETF that safeguards your financial resilience.
