Introduction
If you’ve been around the block with dividend-paying ETFs, chances are you’ve heard of the Schwab U.S. Dividend Equity ETF (SCHD). It’s one of those ETFs that consistently makes waves for dividend investors. But with all the market fluctuations, is now a good time to invest in SCHD? Let’s break it down and get into the numbers, strategies, and potential future for this fund.
What is SCHD ETF?
The Schwab U.S. Dividend Equity ETF (SCHD) is an exchange-traded fund that focuses on high-dividend U.S. stocks. Established in 2011, SCHD tracks the Dow Jones U.S. Dividend 100 Index, which selects companies based on their dividend yields and financial health. Essentially, it’s a diversified basket of quality dividend-paying stocks — companies that have demonstrated both the ability to pay and grow their dividends over time.
What’s great about SCHD is that it doesn't just chase after high yields. Instead, it balances solid yields with sustainable businesses, making it a safe and reliable choice for long-term dividend investors.
How Does SCHD Generate Income?
SCHD generates income through two main channels:
- Dividends from its underlying holdings: The ETF holds a collection of high-dividend stocks like PepsiCo, Verizon, and Pfizer, all of which pay regular dividends. This makes SCHD a passive income machine.
- Capital appreciation: Over time, the price of the stocks in SCHD’s portfolio can increase, contributing to the overall return. The combination of dividend payouts and capital appreciation can lead to substantial long-term gains.
Why is SCHD So Popular Among Dividend Investors?
SCHD has earned a strong reputation thanks to its low expense ratio of 0.06%, which is one of the lowest in the industry. Plus, it offers an attractive dividend yield of around 3.5% as of 2024, making it a good option for income-seeking investors.
The low volatility and strong track record make it a go-to option for those who want steady, reliable returns without the headache of high fees or wild price swings. In fact, SCHD has outperformed many of its peers over the last decade, even during periods of market downturns.
Is SCHD ETF Attractive at Current Price Levels?
Let’s get down to the numbers. As of October 2024, SCHD is trading at around $75 per share. This is slightly down from its 52-week high of $80, but still significantly above its 5-year low of $58.
The current price offers a great entry point for investors looking to lock in a solid yield while benefiting from potential price appreciation. Given its historical performance and the consistency of its holdings, SCHD is still considered undervalued at this point, especially for long-term investors.
Future Outlook: What to Expect from SCHD
In terms of future growth, SCHD is well-positioned to continue delivering solid returns, even in a volatile market. With a well-diversified portfolio that focuses on financially healthy companies, SCHD offers some degree of protection against economic downturns.
The U.S. economy is projected to experience moderate growth over the next few years, which should keep dividend-paying companies in good shape. Moreover, the Federal Reserve’s interest rate policy is expected to stabilize in the coming years, which is generally positive for dividend-paying stocks.
Conclusion: Is SCHD a Buy?
For investors looking for a stable income-generating ETF with long-term growth potential, SCHD is a strong candidate. Its combination of a diverse portfolio, low fees, and reliable dividend payouts make it a great fit for anyone looking to build wealth over time. While the stock market will always have its ups and downs, SCHD has shown time and again that it can weather the storm.