The Schwab U.S. Dividend Equity ETF (SCHD 0.06%) has raised its annual dividend every year since its 2011 inception. That’s 14 consecutive years of dividend growth, a feat that few dividend ETFs can match.
The other stats behind that streak are equally impressive:
- 10.4% annual dividend growth rate over the past decade
- 3.3% dividend yield
- 17.4% year-to-date return; top 10 among U.S. dividend ETFs
Many people associate dividend ETFs with above-average yields but lower total returns. The Schwab U.S. Dividend Equity ETF demonstrates you can have all three: high yield, dividend growth, and strong total returns.
Image source: The Motley Fool.
How SCHD can deliver yield, dividend growth, and high returns
The ETF achieves its dividend increases through a strict dividend stock selection policy that considers elements of high yield, dividend growth, and balance sheet quality.
Schwab U.S. Dividend Equity ETF
Today’s Change
(-0.06%) $-0.02
Current Price
$31.75
Key Data Points
Day’s Range
$31.61 – $31.84
52wk Range
$26.16 – $32.91
Volume
295.3K
A flaw of some ETFs is that they consider only one of these factors, leaving them vulnerable to weaknesses related to the others. The Schwab U.S. Dividend Equity ETF, on the other hand, uses these qualifiers as a cross-check against the others. The result is a portfolio filled almost exclusively with high-quality companies that can deliver dividend growth sustainably for years (if not decades).
The consideration of strong fundamental metrics, including cash flow to debt and return on equity (ROE), also helps mitigate drawdown risk. This is an under-appreciated factor for delivering superior long-term returns. Most investors focus on maximizing upside. Outperformance can also be achieved by minimizing downside.
This is what makes the Schwab U.S. Dividend Equity ETF an important investment option for all investors, whether you’re seeking growth or income, you’re young or old, or wealthy or not.
As much fun as it is to invest in the latest hot tech or artificial intelligence (AI) stock and hope for a moonshot, long-term wealth is built on portfolios of high-quality stocks of companies that generate a lot of cash and build their balance sheets over time.
Few ETFs have done this as well as the Schwab U.S. Dividend Equity ETF. Its current 14-year dividend growth streak indicates a few key facts:
- Companies with long dividend growth histories tend to be more financially stable.
- The 3.3% yield demonstrates that high quality can sit alongside high income generation.
- The fund’s 17.3% year-to-date return and 12.6% 10-year average annual return mean that investors aren’t sacrificing total return for income.
This is the type of investment profile that deserves consideration for anybody’s portfolio.
David Dierking has positions in Schwab U.S. Dividend Equity ETF. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
