Schwab US Dividend Equity ETF (Schd) offers a lot for a surprisingly low expense ratio of 0.06%. What it does is pretty similar to what you might attempt if you’re trying to build a dividend stock portfolio from scratch. Here’s why you might consider investing in the Schwab US Dividend Equity ETF right now:
Understanding the Schwab US Dividend Equity ETF
Essentially, the Schwab US Dividend Equity ETF functions as an index-tracking exchange-traded fund (ETF). When you invest, you’re essentially buying into whatever the index dictates. So, what’s the index in question? It’s the Dow Jones US Dividend 100 Index. But what does it require? That’s a bit more complex.
To qualify for this index, companies must have a history of raising their annual dividends for at least ten consecutive years. This requirement is common among dividend investors, and it excludes Real Estate Investment Trusts (REITs). This is just the baseline for what the index considers.
For each company that meets the ten-year dividend increase criterion, a combined score is generated. This score takes into account various factors such as cash flow relative to total liabilities, return on equity, dividend yield, and the growth rate of dividends over the past five years. Each aspect reflects what dividend investors typically value, including financial stability, business performance, and trends in dividend growth. Essentially, the Dow Jones US Dividend 100 Index—and by extension, the Schwab US Dividend Equity ETF—functions in a way similar to how you would buy individual stocks.
The top-scoring stocks make it into the index and the ETF. Larger companies tend to have a greater effect on performance, given their market focus. As the portfolio adjusts every year, the holdings consistently align with the index’s objectives. All this is managed through a low-cost investment.
Why the Schwab US Dividend Equity ETF is Worth Considering Now
The chart illustrates that the Schwab US Dividend Equity ETF has generally appreciated over time. Furthermore, the dividends it pays have a tendency to increase, which means you’re not only benefiting from capital gains but also from rising income. That’s a win-win for most dividend investors, especially those who might be tired of picking stocks and just want to enjoy life.
Of course, the timing of purchasing Schwab US Dividend Equity ETFs can vary. However, with a current dividend yield around 4%, which positions it on the higher end of its historical range, now appears to be a more favorable time for investment.
While investors likely have a solid place in their hearts for Schwab US Dividend Equity ETFs, this investment strategy closely mirrors what many dividend investors do in practice. It’s a straightforward way to diversify or to ease the burden of managing an investment portfolio. Overall, it remains a compelling choice for most investors.
Current Appeal of the Schwab US Dividend Equity ETF
Schwab US Dividend Equity ETFs are quite appealing right now, particularly due to their yields, which stem partly from significant exposure to the energy sector. Given the recent drop in oil prices, energy stocks have taken a hit. That said, don’t let this deter you from investing. The energy sector tends to experience cycles, and as oil prices rebound—historically, they always do—the high yields may not remain sustainable.
