If You Put $10,000 in This Dividend ETF 15 Years Ago, Here's How Much You'd Have Today (Hint: It's a Lot)
Key Points
The Schwab U.S Dividend Equity ETF has delivered a CAGR of 13.3% since 2011.
Dividends make up roughly 38% of the ETF's total returns.
- 10 stocks we like better than Schwab U.S. Dividend Equity ETF ›
Do you view dividend investing as boring? Think again. Dividends can turbocharge your investment returns. You don't have to pick individual dividend stocks, either. Exchange-traded funds (ETFs) that own a basket of dividend-paying stocks can provide diversification and an opportunity to make money.
Many investors like the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD). This fund attempts to track the total return of the Dow Jones U.S. Dividend 100 Index. It currently owns 103 stocks. If you put $10,000 in this dividend ETF 15 years ago, here's how much you'd have today.
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Steady stocks, dynamite dividends
I won't keep you in suspense. An initial $10,000 investment in the Schwab U.S. Dividend Equity ETF 15 years ago would be worth around $61,200 today. There is an important asterisk here, though. The fund didn't begin trading until Oct. 20, 2011, so it actually hasn't been around a full 15 years.
The compound annual growth rate for the Schwab U.S. Dividend Equity ETF's total return during the period is a solid 13.3%. And this growth pales in comparison to the performance over the last 12 months, with a sizzling CAGR of roughly 29%.
How has the Schwab U.S. Dividend Equity ETF delivered such attractive total returns? The kinds of stocks the fund invested in made a big difference. The ETF's underlying index, the Dow Jones U.S. Dividend 100 Index, focuses on U.S. stocks that consistently pay dividends and have strong financial fundamentals compared to their peers.
A quick look at the ETF's current top holdings reveals several companies with steady, resilient businesses, including Merck (NYSE: MRK), Home Depot (NYSE: HD), Abbott Laboratories (NYSE: ABT), and Coca-Cola (NYSE: KO). Importantly, if a stock stumbles and fails to meet the underlying index's objectives, the fund will replace it.
Don't ignore the power of dividends in driving the Schwab U.S. Dividend Equity ETF's total returns, though. Without dividends, an initial investment of $10,000 in 2011 would be worth about $38,000 today. Dividends accounted for roughly 38% of the total returns.
Before you get too excited...
Now for a buzzkill: You could have made a lot more money putting your money in an S&P 500 index fund. An initial investment of $10,000 in the Vanguard 500 Index Fund (NYSEMKT: VOO) on Oct. 20, 2011, would be worth around $79,700 today.
Still, the Schwab U.S. Dividend Equity ETF has proven to be a winner over time while still generating attractive dividends. For investors seeking income and portfolio growth, this ETF remains a great option.
Should you buy stock in Schwab U.S. Dividend Equity ETF right now?
Before you buy stock in Schwab U.S. Dividend Equity ETF, consider this:
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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories, Home Depot, Merck, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
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