It Takes About $32,000 in This Dividend ETF to Collect $1,000 a Year

An extra $1,000 a year in dividend income is a nice round goal, and getting there doesn't require a complicated strategy. One of the largest dividend funds on the market can do the job by itself.

At today's prices, it takes an investment of about $32,000.

The fund is the Schwab U.S. Dividend Equity ETF (NYSEMKT:SCHD), which manages about $110 billion in assets. Not only does it hold about 100 dividend-paying stocks, but it also costs almost nothing to own, with an expense ratio of 0.06% (about $6 a year on a $10,000 investment). Shares trade around $34 as of this writing.

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How many shares does it take?

SCHD has paid $1.05 per share in distributions across its past four quarterly payments, according to Schwab Asset Management's fund page. Divide $1,000 by $1.05, and you need a little over 950 shares. At the fund's current share price, that stake costs about $32,000 and comes with a dividend yield of about 3.1%.

However, don't expect four even installments. SCHD doesn't declare a dividend the way an individual company does. It passes along the dividends its holdings pay, so the quarterly amounts move around. Over the past year, they've ranged from about $0.25 per share to about $0.28.

The annual total, not any single payment, is the number I'd plan around.

And the next payout is already on the calendar. Schwab's 2026 distribution schedule shows an ex-dividend date of Wednesday, Sept. 23 (investors need to own shares before that date to collect the payment), with the cash going out on Sept. 28. Schwab notes the dates are subject to change.

Built on dividend streaks

The dependability is by design. SCHD tracks the Dow Jones U.S. Dividend 100 Index, which only considers companies that have paid dividends for at least 10 consecutive years, according to the fund's prospectus. From that pool, the index ranks stocks on cash flow relative to debt, return on equity, dividend yield, and five-year dividend growth -- measures aimed at finding companies strong enough to keep paying.

There are guardrails on concentration, too. No single stock can represent more than 4% of the index. And real estate investment trusts, a common source of high yields, are excluded from the index entirely.

The result is a portfolio that leans toward value stocks. As of June 30, household names such as Home Depot and Coca-Cola sat near the top of the fund's holdings. Health care and consumer staples stocks carried the two biggest sector weights, each at about a fifth of the portfolio.

In other words, the fund screens for exactly the trait an income investor wants: a long track record of paying. And the valuation is arguably reasonable -- the portfolio's price-to-earnings ratio sat at about 18 as of June 30.

Payout growth has slowed

Zoom out, and the payout's history is arguably the strongest part of the case. SCHD's annual distribution has increased every year since 2012, the fund's first full year, climbing from $0.27 per share then to $1.05 in 2025 (adjusting for a 2024 share split). That works out to about 11% compounded annually. But the recent steps have been smaller. The annual payout rose about 12% in 2024 and about 5% in 2025, and the trailing-12-month total sits just over 2% above the year-ago figure. The income stream is still growing -- it's just been decelerating for two years.

That difference matters for anyone buying the fund for income today. At something like the long-run rate, a $1,000 income stream would double about every seven years without another dollar invested, the sort of compounding usually associated with growth stocks. At the recent pace, it may do little more than keep up with inflation.

Buyers today should probably set their expectations closer to the modest end.

Of course, none of it is guaranteed. The fund only passes along what its holdings pay, and companies can trim their dividends in a downturn.

The principal moves, too. SCHD's shares have traded as low as $26.32 and as high as $35.31 within the past year, so a $32,000 stake won't sit still even while the payments keep coming.

Still, if I were building a dividend income stream today, I'd buy SCHD as a core piece of it at this price. The fund offers a yield of about 3.1%, and its index does the quality screening. I'd just plan on the payout growing modestly from here, and treat anything faster than that as a bonus.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool has a disclosure policy.