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I am not a financial advisor. This post is to provide information and not provide financial product advice. I discuss why I personally chose to invest in a stock, ETF, ETNs, CEF, REIT, investment fund or cryptocurrency (which I have held for over a week) and also share information that is public about the following stock, ETF, ETN, CEF, REIT, investment fund or cryptocurrency and they are based on my own personal opinion.
If I do not have anything invested or if I have sold the stock at the time of blogging the article, I will definitely let readers know.
I will not blog about any positions of stocks, ETFs, ETNs, CEFs or REITS and cryptocurrency which were initiated just within the last 72 hours of posting this blog article.
It is recommended that you should always consider visiting a financial advisor for independent financial advice before making investment decisions.
I do not work in the financial industry, so just because I write about it, doesn’t mean you should own it. So, consult with a financial advisor and do your due diligence, RESEARCH!
The results shown or discussed represent past performance; past performance does not guarantee future results. Current performance may be lower or higher than the past performance shown, which does not guarantee future results. Share price, principal value, and return will vary, and you may have a gain or a loss when you sell your shares.
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When it comes to investing in dividend ETFs, the Schwab U.S. Dividend Equity ETF (NYSE Arca: SCHD) is known to be one of the better, safer, dividend growth ETFs.
With a low gross expense ratio of 0.06%, the The fund’s goal is to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Dividend 100™ Index.
Highlights of the ETF include:
- A straightforward, low-cost fund offering potential tax-efficiency
- The Fund can serve as part of the core or complement in a diversified portfolio
- Tracks an index focused on the quality and sustainability of dividends
- Invests in stocks selected for fundamental strength relative to their peers, based on financial ratios
Currently sold at around $75.22, the 52-week range is $52.94-$78.41 and the previous dividend payment was $0.53 with a distribution yield at 2.89%.
Aside from the pandemic year of 2020, as you can see from the chart from 2011-2021, there has been consistent growth.
And part of that is a plan to focus on companies on the Down Jones U.S. Broad Market Index with the exception of Real Estate. 90% of the assets in the ETF are from the the index.
And for those not familiar with the Dow, only 100 stocks that have a minimum of ten consecutive years of dividend payments and a minim float-adjust market cap of $500 million can be accepted.
And the index can’t represent more than 4.0% of the index and a particular sector can’t exceed 25%.
And so SCHD is rebalanced quarterly to make sure it meets its 4% and 25% and the ETF is reviewed annually.
The ETF currently holds 104 companies with the top 10 being:
- Pepsi (4.34%)
- The Home Depot (4.30%)
- Amgen Inc. (4.19%)
- Pfizer Inc. (4.19%)
- Merck & Co. Inc. (4.18%)
- Broadcom Inc. (4.11%)
- Texas Instruments Inc. (4.10%)
- BlackRock Inc. (4.10%)
- Coca-Cola Inc. (4.09%)
- Cisco Systems Inc. (4.03%)
The fund features an investment in all 9 of the 11 sectors:
One of the reasons why I am long and invest heavy into SCHD is because it covers all eleven sectors and its a strong equity, high yielding ETF.
For me personally, as an investor in all eleven sectors, I had to get out of several positions to keep things simple. To make sure I’m not overdiversified and was able to trim my holdings considerably and while focusing on VTI on my non-taxable account, I have SCHD in my taxable account.
I wanted SCHD to cover areas where I was most weakest which is Information Technology and Industrials. While it allows me to continue to focus on Energy, Real Estate and Utilities, its comforting to know that my continued compound of SCHD keeps me well invested in various sectors.
And SCHD invests in companies that provide dividends but not so focus on FAANG stocks as their principal holdings. And I like the fact that Financials are the primary invested holdings in this fund, followed by cyclicals to make it a great defensive ETF.
And so far, you get over $2.00 annually for dividends and so far in 2021, Q1 produced $.50 and Q2 at $.53 and as you can see from the chart, while certain quarters produce some drops, at least in total annual dividends, it has increased.
But in terms of performance, it has outperformed the Vanguard High Dividend Yield ETF (VYM) and has generated more than double the average yield of the S&P 500.
And the index can’t represent more than 4.0% of the index and a particular sector can’t exceed 25%.
For me personally, I feel that my investment in SCHD is for long-term, defensive (especially the unknown of what will happen in 2023 with the looming increase in interest rates).
SCHD also gives me the opportunity to continue to invest in stocks, but to trim down my positions knowing that the ETF can focus on other dividend producing companies in the Dow Index.
Sure, it may not have FAANG but that’s why I invest in index stocks that do.
It’s important to note that while SCHD is excellent, if you want high yield, high risk and better monthly dividends, there are other ETFs that do just that.
But for those who are looking for a dividend ETF with solid capital appreciation and consistent growth and also a great defensive play in your investment portfolio, SCHD is an ETF worth considering.
As always, perform your due diligence and do a lot of research before investing. Talk to a financial advisor and find out if Schwab U.S. Dividend Equity ETF (NYSE Arca: SCHD) would be a good investment for you.
