A $1,000 Monthly Investment in the Schwab U.S. Dividend Equity ETF (SCHD) Could Build Serious Passive Income Over 20 Years
Key Points
The Schwab U.S. Dividend Equity ETF offers a great mix of growth and dividend income.
Its dividend recently yielded 3%.
It's invested in a range of mostly blue chip companies.
- 10 stocks we like better than Schwab U.S. Dividend Equity ETF ›
Looking for passive income and a lot of it? Who wouldn't like that? Passive income can come from multiple sources, such as certificates of deposit (CDs), pensions, annuities, royalty checks, rental properties, and dividends, to name a few. I think dividend income is particularly compelling because:
- Healthy and growing dividend payers tend to increase their payouts over time, often helping shareholders keep up with inflation.
- Such companies also tend to keep paying no matter whether the economy is booming or in a slump.
- Dividend payers are simply great investments, in general. Check it out:
|
Dividend-Paying Status Missed AI’s "Act 1"? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we’re only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue » |
Average Annual Total Return, 1973-2025 |
|---|---|
|
Dividend growers and initiators |
10.22% |
|
Dividend payers |
9.20% |
|
No change in dividend policy |
6.87% |
|
Dividend non-payers |
4.21% |
|
Dividend shrinkers and eliminators |
(0.96%) |
|
Equal-weighted S&P 500 index |
7.74% |
Data source: Ned Davis Research and Hartford Funds.
Image source: Getty Images.
One of my favorite dividend-focused investments is the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD). If you invest, say, $1,000 per month, you could build a meaningful passive income stream. I'll get into how much soon.
Meet the Schwab U.S. Dividend Equity ETF
The Schwab U.S. Dividend Equity ETF is an exchange-traded fund (ETF) -- a fund that trades like a stock. So you can easily invest in it via most brokerage accounts at any time during trading hours.
It tracks the Dow Jones U.S. Dividend 100 Index, which holds about 100 carefully selected stocks from high-quality companies with at least 10 years of dividend payments. Here's how the Schwab ETF has performed in recent years -- compared to a good low-fee S&P 500 index fund:
|
ETF |
Recent Yield |
5-Year Avg. Annual Return |
10-Year Avg. Annual Return |
15-Year Avg. Annual Return |
|---|---|---|---|---|
|
Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) |
3% |
9.98% |
13.12% |
13.47%* |
|
Vanguard S&P 500 ETF (NYSEMKT: VOO) |
1% |
12.65% |
15.31% |
15.06% |
Data source: Morningstar.com, as of Sept. 15, 2026.
*as of inception date, Oct. 20, 2011
You can see that while the S&P 500 (SNPINDEX: ^GSPC) index fund performed better, it didn't perform that much better. And its recent dividend yield is triple that of the S&P 500.
In other words, it tends to deliver solid growth -- plus solid dividend income. That's not the norm. Many good dividend-focused ETFs tend to offer either brisk growth or a meaningful dividend yield, but not both.
Here are the Schwab ETF's recent top holdings, which recently made up about 42% of the fund's value:
|
Stock |
Weight in ETF |
|---|---|
|
Merck |
4.73% |
|
Abbott Labs |
4.41% |
|
Chevron |
4.33% |
|
ConocoPhillips |
4.27% |
|
Coca-Cola |
4.25% |
|
Amgen |
4.19% |
|
Verizon Communications |
4.16% |
|
Procter & Gamble |
3.94% |
|
UnitedHealth Group |
3.76% |
|
The Home Depot |
3.68% |
Data source: Morningstar.com, as of Sept. 16, 2026.
These are a very different set of top holdings from those of the S&P 500 index, which includes stocks such as Nvidia and Apple, each weighted at 8.1% and 7%, respectively. Such dynamic growth stocks explain the S&P 500's terrific performance in recent years, but whenever the stock market corrects or crashes, such stocks often fall harder. The Schwab U.S. Dividend Equity ETF, on the other hand, is more focused on somewhat slower-but-steady growers.
How much can you amass investing $1,000 per month?
So if you invest, say, $1,000 per month, which is $12,000 per year, in the Schwab ETF, how well might you do? Well, here are several credible scenarios:
|
Investing $1,000 per month ($12,000 annually) for |
Growing at 8% annually |
Growing at 10% annually |
Growing at 12% annually |
|---|---|---|---|
|
Five years |
$70,399 |
$73,261 |
$76,234 |
|
10 years |
$173,839 |
$191,249 |
$210,585 |
|
15 years |
$325,825 |
$381,270 |
$447,357 |
|
20 years |
$549,144 |
$687,300 |
$864,629 |
|
25 years |
$877,271 |
$1,180,165 |
$1,600,006 |
|
30 years |
$1,359,399 |
$1,973,928 |
$2,895,992 |
|
35 years |
$2,067,802 |
$3,252,292 |
$5,179,962 |
|
40 years |
$3,108,678 |
$5,311,111 |
$9,205,097 |
Data source: Calculations via Investor.gov's calculator.
Those results include the reinvestment of dividends. If you want to separate the dividend income, you could do it this way: Take year 20. Let's say the fund averaged 10% annual growth, and your stake is worth around $687,000. If the ETF's dividend yield remains 3%, you'd collect about $20,600 in dividend income.
Passive income seekers should definitely consider investing in one or more solid dividend-focused ETFs -- such as this one.
Should you buy stock in Schwab U.S. Dividend Equity ETF right now?
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Selena Maranjian has positions in Amgen, Apple, Nvidia, Procter & Gamble, Schwab U.S. Dividend Equity ETF, and Verizon Communications. The Motley Fool has positions in and recommends Abbott Laboratories, Amgen, Apple, Chevron, Home Depot, Merck, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool recommends ConocoPhillips, UnitedHealth Group, and Verizon Communications. The Motley Fool has a disclosure policy.
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