Here are two reasons why I can’t stop Investing in the Schwab US Dividend Equity ETF.
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Steadily increasing flow of dividend income
I like collecting dividend income. That recurring cash flow gives me more money to invest and also puts me on the path to financial freedom.
The Schwab US Dividend Equity ETF is in line with my strategy of generating more dividend income. The fund tracks an index (Dow Jones US Dividend 100 Index) which measures the performance of 100 high yield dividend stocks Selections were made based on several dividend quality characteristics, including dividend yield and five-year dividend growth rate.
(-1.41%) $-0.45
current price
$31.41
key data points
day limit
$31.29 -$31.71
52wk range
$23.87 -$31.95
volume
336K
The ETF currently offers a 3.5% dividend yield, based on its payouts over the last 12 months. is three times more than S&P 500Dividend yield of (about 1.1%). As a result, the fund enables me to generate more passive income per dollar invested than lower yielding alternatives.
Meanwhile, the fund’s holdings have steadily increased their dividends. Over the past five years, its current holdings have grown their payouts by more than 8% annually. As a result, the Schwab US Dividend Equity ETF has consistently delivered higher income to investors:
SCHD Dividend data by YCharts
The fund’s high current yield and steadily increasing income distribution will enable me to collect more passive dividend income in the future.
strong total returns
Dividends are only one part of the income draw. The Schwab US Dividend Equity ETF also has a strong track record of delivering attractive total returns (dividend income plus price appreciation). Since its formation in October 2011, the fund has delivered an average annual return of 12.9%. It has also given annual returns of more than 10% over the last five and 10 year periods. Meanwhile, this is This year got off to a strong start.
A key driver of those strong returns is the fund’s strategy of investing in companies that grow their dividends. Over the past 50 years, the average dividend producer in the S&P 500 has delivered a 10.2% average annual return, according to data from Ned Davis Research and Hartford Funds. It has outperformed companies with no changes in their dividend policies (6.8% return), dividend cutters and eliminators (-0.9% return), and companies not paying dividends (4.3%).
Sustainable earnings growth is the primary factor that enables companies to consistently increase their dividends. Increase in earnings leads to increase in share price in the long run. As a result, by tracking an index that screens companies for dividend growth, the fund’s value should continue to increase as earnings, dividends and stock prices of the underlying holdings rise.
a wealth enhancing machine
The Schwab US Dividend Equity ETF’s simple strategy of investing in 100 top high-yield dividend growth stocks matched my needs perfectly. This provides me with an above average, steadily growing stream of dividend income. Moreover, the fund has a strong record of delivering double digit total returns. These dual value drivers should enable me to reach financial freedom faster, which is why I continue to load up on this top ETF.
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