Is the Schwab U.S. Dividend Equity ETF a Buy Now?
Key Points
This investment is an ETF -- a fund that trades like a stock.
It encompasses 100 solid dividend-paying stocks.
It sports a tiny annual fee, too.
- 10 stocks we like better than Schwab U.S. Dividend Equity ETF ›
If you're like me, you may have spent a lot of time looking at the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) and wondering whether you should invest in it. I invested in it a while ago and am happy with it. But is it a buy now for you?
I think it is, and I'll explain why soon. First, though, get to know the Schwab U.S. Dividend Equity ETF. (Remember that an exchange-traded fund (ETF) is a fund that trades like a stock, so you can buy or sell shares of it anytime during the trading day, via any good brokerage.)
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What's so great about the Schwab U.S. Dividend Equity ETF?
The first thing to love about this ETF is that it tracks the Dow Jones U.S. Dividend 100 Index, which encompasses 100 stocks with a track record of paying dividends for at least 10 years. It also focuses on companies that appear financially healthy, based on factors such as cash flow to total debt and return on equity. It's great to invest in dividend-paying stocks, but you also want them to be financially healthy, lest they end up reducing or curtailing their dividends one day.
Another plus for the Schwab U.S. Dividend Equity ETF is its tiny expense ratio (annual fee), which is just 0.06%. That means you'll pay only $6 for every $10,000 you have invested in the fund. Performance matters, too, so check out the Schwab U.S. Dividend Equity ETF's trailing returns:
|
Period |
Average annual gain |
|---|---|
|
Past 3 years |
7.79% |
|
Past 5 years |
11.92% |
|
Past 10 years |
12.09% |
Source: Morningstar.com, as of September 8, 2025.
Dividends matter
Another plus for this fund is its sizable dividend yield, which was recently 3.7%. If you invest $10,000 in this ETF, you can expect somewhere around $370 in dividends over the course of a year. Better still, you can expect most of the companies in the Dow Jones U.S. Dividend 100 Index to grow in value over time, with many of them increasing their dividends, often annually.
So, within a few years, you may be collecting $400, $500, or more each year from $10,000 invested in the ETF. To appreciate the power of dividend investing, check out this table:
|
Dividend-Paying Status |
Average Annual Total Return, 1973-2024 |
|---|---|
|
Dividend growers and initiators |
10.24% |
|
Dividend payers |
9.20% |
|
No change in dividend policy |
6.75% |
|
Dividend non-payers |
4.31% |
|
Dividend shrinkers and eliminators |
(0.89%) |
|
Equal-weighted S&P 500 index |
7.65% |
Data source: Ned Davis Research and Hartford Funds.
Clearly, dividend payers are no slouches in the investment world. Part of the explanation for this is that, among the thousands of publicly traded stocks out there, some will perform poorly or totally flame out. But dividend payers are at least somewhat less likely to, as they had to grow to a particular size with certain dependable income for their management to commit to paying a regular dividend. Here are the top 10 holdings as of May 8:
|
Stock |
Weight in ETF |
Recent yield |
|---|---|---|
|
AbbVie |
4.31% |
3.13% |
|
Home Depot |
4.27% |
2.19% |
|
Altria Group |
4.26% |
6.45% |
|
Chevron |
4.24% |
4.44% |
|
PepsiCo |
4.22% |
4.02% |
|
Merck |
4.11% |
3.85% |
|
ConocoPhillips |
4.10% |
3.41% |
|
Cisco Systems |
3.94% |
2.45% |
|
Verizon Communications |
3.89% |
6.37% |
|
Amgen |
3.75% |
3.40% |
Source: Yahoo! Finance and Morningstar.com, as of September 6, 2025. ETF = exchange-traded fund.
Most of those names are probably familiar to you. However, you might not have appreciated that some solid dividend payers, including Altria and Verizon, offer dividend yields topping 6%.
So, is this ETF a buy now? I say yes if you're looking for a nice combination of income and growth. I'm bullish in large part because no one knows what the stock market will do from day to day or even year to year, though the long-term trend has always been up. I think it's better to be invested and ride through upturns and downturns, rather than trying to time the market and sitting on the sidelines.
If you're uncomfortable jumping in, you might do so incrementally over time.
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Selena Maranjian has positions in AbbVie, Altria Group, Amgen, Schwab U.S. Dividend Equity ETF, and Verizon Communications. The Motley Fool has positions in and recommends AbbVie, Amgen, Chevron, Cisco Systems, Home Depot, and Merck. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.
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