Title: The Ultimate Low-Cost Dividend ETF You Shouldn't Miss Out On
Investing smartly often involves making strategic trade-offs. For instance, you might sacrifice higher growth potential for reliable dividend income, or vice versa. However, the Schwab U.S. Dividend Equity ETF (SCHD) isn't your typical compromising situation.
With a trailing-12-month dividend yield of approximately 3.5% - more than double the S&P 500's yield of 1.4% - you might expect modest dividend growth and lackluster capital appreciation. But you'd be wrong about SCHD.
Over the past 12 months, SCHD has dished out $2.61 worth of dividend payouts, representing a 70% increase from five years ago and a staggering 175% increase compared to a decade ago. Its dividend growth has compounded at an annualized rate of over 10%, outstripping inflation.
While it's true that SCHD hasn't quite kept pace with the S&P 500's remarkable 180% growth over the past decade, it's hardly floundering. With its price climbing over 110% during this period and a total return of an impressive 190% for investors who reinvested their dividends, SCHD is a solid performer.
So, how does SCHD achieve these impressive results? By investing in high-quality dividend stocks, SCHD outperforms the market. Studies show that U.S. stocks with near-max dividend yields consistently beat the S&P 500, as do companies initiating or regularly raising their dividends.
SCHD's strategy of focusing on quality stocks pays off. Hartford's research indicates that the highest-performing dividend stocks commit only about 40% of their bottom lines to dividend payments, leaving plenty of resources for business growth and expansion. This more sustainable dividend policy leads to stable, reliable companies that are the market's most sought-after stocks.
If you're looking for pure growth, Vanguard Growth ETF (VUG) is your better option. For maximum current yield without much concern for dividend growth, consider the SPDR Portfolio S&P 500 High Dividend ETF (SPYD). But if you're after a balance of current income, dividend growth, and capital appreciation, SCHD's performance in all three categories is hard to beat, thanks to its focus on high-quality dividend stocks with a proven track record of growth. Just be prepared to hold on for a few years and let its holdings work their magic. It's worth the trade-off.
In the context of SCHD's impressive performance, investing in high-quality dividend stocks has proven to be a strategic choice that often outperforms the market. Despite sacrificing potentially higher growth for reliable dividend income, SCHD's dividend growth has compounded at an annualized rate of over 10%, outpacing inflation.
