Exploring Dividend-Focused ETFs
It’s worth considering exchange-traded funds (ETFs) occasionally—especially those that center around high-dividend stocks. There are several options out there, but I find the Schwab US Dividend Stock ETF particularly appealing.
Let’s dive into what makes it stand out.
Solid Combination of Income and Growth
Generally, dividend-focused ETFs trade off between income and growth. High-yield ETFs often grow at a slower rate, while those focused on growth yield less. However, the Schwab U.S. Dividend Stock ETF manages to excel in both areas.
As of late, the fund has shown a dividend yield of 3.25%—not too shabby. To put it in perspective, the Vanguard S&P 500 ETF yields only about 1.1%.
| Fund | Average Annual Revenue (3 years) | Average Annual Revenue (5 years) | Average Annual Revenue (10 years) |
|---|---|---|---|
| Schwab US Dividend Stock ETF | 15.09% | 8.50% | 12.78% |
| Vanguard S&P 500 ETF | 22.44% | 14.10% | 15.56% |
Though the Schwab fund is up 19% this year, which, sure, it’s lower than some other funds. Yet it offers nearly three times more dividend income compared to the S&P 500.
Another plus? The expense ratio is only 0.06%. If you put in $10,000, the fee comes to just $6—pretty reasonable.
This ETF aims to track the Dow Jones U.S. Dividend 100 Index, which consists of 100 companies that have consistently paid dividends for over a decade. The criteria also assess each company’s financial health, which could help maintain stability, as struggling companies may need to cut dividends.
Additionally, robust, high-dividend companies generally tend to increase their dividends over time, which is great for investors.
Composition of the Schwab U.S. Dividend Stock ETF
As of early June, here are the top 10 stocks in the ETF along with their respective weights and recent dividend yields:
| Stock | ETF Weight | Recent Yield |
|---|---|---|
| Qualcomm | 6.21% | 1.47% |
| Texas Instruments | 5.72% | 1.84% |
| United Health Group | 5.14% | 2.46% |
| Coca Cola | 3.98% | 2.69% |
| Chelsea | 3.95% | 3.75% |
| Merck | 3.78% | 2.96% |
| Verizon Communications | 3.68% | 6.07% |
| ConocoPhillips | 3.60% | 2.82% |
| Procter and Gamble | 3.50% | 3.04% |
| Amgen | 3.43% | 2.98% |
These stocks together represent about 43% of the ETF’s total value. The fund diversifies its holdings with around 18% in consumer defensive stocks, 15% in energy, and another 18% in healthcare. I find this mix appealing, particularly as I suspect the market might see a downturn in the next year or two. In such a case, these sectors could be more resilient.
So, if you’re on the lookout for growth and income in your long-term stock portfolio, this dividend-focused ETF deserves a spot on your radar.
