One of the best ways to grow your wealth is to invest in exchange-traded funds (ETFs). These products offer investors exposure to a basket of stocks, at a fraction of the cost it would take to purchase each one individually.
Dividend stocks have struggled due to volatility in the 10-year treasury yield, impacting income-producing assets like bonds, REITs, and dividend paying stocks. SCHD follows the Dow Jones U.S. Dividend 100 index, emphasizing financial health and dividend growth, differentiating it from other dividend funds. SCHD's top holdings, HD and CSCO, are blue-chip companies with robust dividend growth and significant share buyback programs.
We're all hopefully going to age into retirement. And as we continue to invest our money toward our golden years, many investors may wonder – what's the best path toward the kind of wealth-building journey that will make these years the most memorable and enjoyable?
Dividend investing is a strategy that is focused on generating income from a company's dividend payouts, and this strategy has long been a cornerstone of portfolio building. For investors prioritizing a steady income stream and the potential for enhanced portfolio stability, dividend-paying stocks often represent an attractive option.
Earnings revision scores for SCHD's 100 components have dramatically improved over the last six months. SCHD's aggregate score now ranks #1/114 in the large-cap value category. However, sufficient price momentum has yet to follow. I expect this gap will close in the near term, as Wall Street analysts use their influence to drive prices higher. SCHD's value and quality features remain strong, with growth and an increasing dividend payout ratio its main weakness. Still, the odds of outperformance are again in its favor.
Looking for broad exposure to the Large Cap Value segment of the US equity market? You should consider the Schwab U.S. Dividend Equity ETF (SCHD), a passively managed exchange traded fund launched on 10/20/2011.
SCHD has delivered a nearly 24% total return over the past year compared to its TTM dividend yield of 3.3%. Investors can benefit from potential capital appreciation, given the fundamentally strong companies in its holdings. SCHD focuses on mature, dividend-paying companies with strong economic moats and defensive sector allocations.
The Schwab US Dividend ETF (SCHD) stock price has done well this year and is hovering near its all-time high of $29.70. It has jumped by 16.5%, a notable performance for a fund that has no exposure to the fast-growing technology sector.
The Schwab U.S. Dividend Equity ETF is a solid choice for income and appreciation, despite recent underperformance. SCHD invests in 100 dividend-paying stocks from the Dow Jones U.S. Dividend 100 Index, focusing on fundamentally sound, reasonably priced businesses. While initial capital requirements to replace an income are high, the yield growth has been significant, lowering the barrier to entry.
SCHD remains a gold-standard dividend ETF, but has seen its growth prospects decline. Income growth potential dropped from 13%-14% to 8%-9%. SCHD's portfolio growth consensus has fallen 50% to 66% in the last few years, and its rules-based portfolio design will not likely improve. Combining the JPMorgan Equity Premium ETF and VictoryShares Free Cash Flow Yield ETF offers a superior alternative with a 4.6% yield and 13%- 14% income growth.
Despite its effective combination of dividend income and dividend growth, Schwab U.S. Dividend Equity ETF™ has some weaknesses, such as its reduced level of diversification, indicated by its limited exposure to some sectors. I will address these weaknesses by demonstrating how to build a $50,000 dividend portfolio by enhancing SCHD with November's top 10 high dividend yield companies. The Weighted Average Dividend Yield [FWD] of this dividend portfolio stands at 4.32%, and its 5-Year Weighted Average Dividend Growth Rate [CAGR] at 9.02%, mixing income and growth potential.
SCHD is a misunderstood ETF, and still excels in providing reliable dividend income and capital appreciation. SCHD's stock selection prioritizes companies with strong financial metrics, ensuring sustainable and growing dividends, despite recent underperformance due to unique market conditions. Comparing SCHD to VYM, SCHD shows superior long-term capital growth and risk-adjusted returns, though VYM had an exceptional year in 2024.