Want Decades of Passive Income? Buy This ETF and Hold It Forever (Do so and You'll Quickly Be a Part Owner of Chevron and Lockheed Martin, Among Many Others)
Key Points
The Schwab U.S. Dividend Equity ETF tracks an index of roughly 100 companies that seem financially healthy and have been increasing their dividend payouts.
It has delivered double-digit gains, on average, over the past five and 10 years.
It's a great way to be quickly diversified with lots of dividend payers (and growers).
- 10 stocks we like better than Schwab U.S. Dividend Equity ETF ›
Do you want decades of passive income? Of course you do -- who wouldn't want cash just arriving at your doorstep, regularly, with little effort required? If you're young, that income can be used to boost your savings toward a down payment or can be deployed into more shares of stock. If you're in or near retirement, that income can help pay for your living expenses.
A particularly effective way to invest in dividend-paying stocks is via a dividend-focused exchange-traded fund (ETF) -- a fund that trades like a stock and that's invested in many dividend payers.
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Why dividends?
If you can't help but yawn at the thought of dividend-paying stocks, check out the table below:
|
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.
See? Dividend-paying stocks can be powerful components of your long-term stock portfolio.
Dividend ETFs
There are multiple solid income-producing ETFs. I've listed some below for you to check out -- including a simple S&P 500 index fund and an ETF focused on preferred stocks, which tend to feature high dividends and little stock price appreciation. The one that seems most compelling to me is the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD), and I'll soon dig into it a bit more. (Each of these funds is well worth considering, though!)
|
ETF |
Recent Yield |
5-Year Avg. Annual Return |
10-Year Avg. Annual Return |
|---|---|---|---|
|
iShares Preferred & Income Securities ETF |
6.6% |
2.28% |
3.51% |
|
SPDR Portfolio S&P 500 High Dividend ETF |
4.6% |
12.47% |
8.92% |
|
Schwab U.S. Dividend Equity ETF |
3.9% |
10.01% |
11.48% |
|
Fidelity High Dividend ETF |
3.1% |
17.85% |
N/A |
|
iShares Core Dividend Growth ETF |
2% |
12.84% |
13.05% |
|
Vanguard Dividend Appreciation ETF |
1.6% |
12.18% |
13.24% |
|
Vanguard S&P 500 ETF |
1.1% |
15.79% |
14.79% |
Data source: Morningstar.com, as of Nov. 12, 2025.
You'll note a wide range of yields and trailing returns above. Before you rush to grab the fattest returns, note that they're often tied to lower dividend yields. There's generally a trade-off between yield and growth, because faster-growing companies tend to want to invest more of their earnings into furthering their growth instead of rewarding shareholders with dividend payouts -- and more established, slower-growing companies often have so much income that they can pay out a larger portion of their income.
I'm most drawn to one of the funds in the middle -- because it offers a nice mix of both income and growth.
Meet the Schwab U.S. Dividend Equity ETF
Here are some reasons I love the Schwab U.S. Dividend Equity ETF:
- The Schwab U.S. Dividend Equity ETF tracks the Dow Jones U.S. Dividend 100 Index, which holds about 100 stocks with track records of paying dividends for at least 10 years -- and which also seem to be tied to high-quality companies.
- It has a solid dividend yield, recently 3.71%, and that payout has been growing over time: Its quarterly dividend payout was $0.26 per share in September 2025, up considerably from $0.22 in September 2023 and $0.12 in September 2018.
- Its trailing growth rates are solid, reaching double digits for the past five and 10 years. That's close to or above the roughly 10% average annual gain for the S&P 500 over many decades (ignoring inflation). The past decade has featured above-average market gains, so don't expect that to continue uninterrupted. The coming decade may well feature somewhat lower average annual gains.
- The ETF features an extremely low expense ratio (annual fee) of just 0.06%, which means you'll have to pay the princely sum of $0.60 for each $1,000 you have invested in the fund.
As of mid-November, the ETF held 103 stocks, and these were the top 10, together making up 42% of the ETF's total value:
|
Stock |
Weight in ETF |
|---|---|
|
Amgen |
4.82% |
|
Merck |
4.37% |
|
AbbVie |
4.30% |
|
Cisco Systems |
4.28% |
|
Coca-Cola |
4.20% |
|
Bristol-Myers Squibb |
3.03% |
|
Chevron |
4.00% |
|
PepsiCo |
3.95% |
|
ConocoPhillips |
3.87% |
|
Lockheed Martin |
3.82% |
Data source: Morningstar.com.
Dig a little deeper into the fund to see if it seems a good fit for you. And remember that there are plenty of other terrific ETFs out there -- including some impressive growth-oriented ETFs.
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Selena Maranjian has positions in AbbVie, Amgen, Bristol Myers Squibb, and Schwab U.S. Dividend Equity ETF. The Motley Fool has positions in and recommends AbbVie, Amgen, Bristol Myers Squibb, Chevron, Cisco Systems, Merck, Vanguard Dividend Appreciation ETF, and Vanguard S&P 500 ETF. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.
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