If You Invest $50 a Week in SCHD, Here's What History Says You Could Collect in Passive Income by 2046
Key Points
The Schwab U.S. Dividend Equity ETF (SCHD) is one of the best funds for generating predictable, sustainable high yield.
Over a long-term time frame, even $50 a week can turn into more than $100,000.
Here's the math for how much regular income the SCHD can generate.
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What could $50 a week realistically turn into if you invested it in the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) for the next 20 years? History suggests it could be quite a bit.
Let's start with contributions. Investing $50 every week translates to $2,600 annually. Keep doing that over the course of 20 years, and you'll have contributed $52,000 in total.
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Now, the most important part: the power of compounding.
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The Schwab U.S. Dividend Equity ETF has generated an average annual return of 13.2% over the past 10 years, with dividends reinvested. At that rate of compounding, a $50 weekly investment would grow to just over $250,000 by 2046.
The dividend piece, however, is where the investment case gets especially compelling.
Assuming the fund maintains a 3.2% yield, your portfolio would generate only a few dollars of income during the first year. But every reinvested dividend buys more shares, which would begin generating dividends of their own.
Using that 3.2% yield over the 20 years, the portfolio would generate roughly $72,000 in cumulative dividend income, assuming those distributions were reinvested.
Those numbers, of course, aren't guaranteed. The Schwab U.S. Dividend Equity ETF's future returns and yields can fluctuate. But the historical math illustrates a bigger point. Just $52,000 in contributions over 20 years could grow to more than $250,000, generating thousands of dollars in dividends in the process.
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David Dierking has positions in Schwab U.S. Dividend Equity ETF. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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