The $100 Investment That Could Change Everything
Key Points
Dividend growth stocks have delivered the highest returns over the past 50 years.
The Schwab U.S. Dividend Equity ETF is an easy way to invest in dividend growth stocks.
The fund has delivered strong returns over the years.
- 10 stocks we like better than Schwab U.S. Dividend Equity ETF ›
$100 might not seem like a life-changing amount of money to most people these days. However, it can be if used wisely.
Investing $100 in the right investments can really add up over the years. Here's a look at the $100 investment that could change everything.
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The smartest way to invest $100
Ned Davis Research and Hartford Funds dug into the data on the returns of the S&P 500 Index by dividend policy. They found that the best returns came from companies that increased their dividends (an average annual return of 10.2% over the last 50 years). That was much higher than companies that didn't increase their dividends (6.8%) and non-dividend payers (4.3%).
Put another way, if a person invested $100 into dividend growth stocks 50 years ago, that investment would have grown to be worth nearly $15,900 by the end of last year (assuming dividend reinvestment). That compares to only about $3,000 for a $100 investment in companies with no change in their dividend policy, and not even $900 from a $100 investment into dividend non-payers.
There are lots of ways to invest in high-returning dividend growth stocks. One of the easiest is through an exchange-traded fund (ETF) such as the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD). The fund holds 100 of the highest-quality dividend stocks selected based on several quality characteristics, including dividend yield and five-year dividend growth rate.
The fund's focus on dividend growth stocks has really paid off over the years. It has delivered an average annualized total return of more than 11% over the past five- and 10-year periods, as well as since its inception in 2011. That can really add up over the years. For example, investing $100 a month into the fund would grow to more than $2 million in 50 years at an 11% average annual total return.
Given the historical returns of dividend growth stocks, a $100 investment can truly make a significant difference.
Should you invest $1,000 in Schwab U.S. Dividend Equity ETF right now?
Before you buy stock in Schwab U.S. Dividend Equity ETF, consider this:
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Matt DiLallo 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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