This Dividend ETF May Be the Ultimate Income Investment to Put in Your Portfolio Right Now
Key Points
The Schwab U.S. Dividend Equity ETF invests in carefully selected dividend stocks that have strong financials.
It isn't an overly diverse fund, but it provides investors with exposure to many different sectors.
With low fees and a high yield, it gives dividend investors the best of both worlds.
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Finding just the right dividend investment can be challenging, as you want to have some good diversification, a solid yield, and you want to ensure your risk isn't all that high.
Striking a good balance between yield and risk isn't easy, but there's one exchange-traded fund (ETF) that does an excellent job of that, and it's the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD). Here's why I think this is an investment that can be a suitable option for any dividend investor.
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The fund's selection of dividend stocks is top-notch
What's appealing about the Schwab fund is that its portfolio isn't overly diverse, which inevitably leads to having just a minor position in many stocks. It has around 100 holdings, carefully selected to meet its criteria, which are based on financial ratios to ensure the underlying fundamentals are strong. That means many high-risk dividend stocks won't make the cut, even if their yields are high.
The mix of stocks makes it clear this is a fairly low-risk investment. Tech stocks only make up 11% of its holdings, while far more stable sectors such as consumer staples, healthcare, and energy all account for between 16% and 20%. And even within those sectors, the stocks themselves are fairly solid ones. Many of them have impressive track records for not only paying but also increasing their payouts, including blue chip stocks such as Coca-Cola, Procter & Gamble, and Abbott Laboratories.
While no investment is entirely risk-free, the Schwab fund's mix of stable dividend stocks makes it one of the safer options to consider. It has averaged a beta of 0.61 over the past five years, which indicates that it doesn't follow the market's movements closely (which is what a beta of 1.0 would suggest).
This ETF offers a bit of everything for dividend investors
For investors, the two best features of this ETF are likely to be its low fees and high yield. The Schwab fund only charges an expense ratio of 0.06%, while its yield is around 3.3%, which is about three times what you'd get with tracking the overall S&P 500 (its yield is just 1.1%).
The Schwab fund may very well be the ultimate option for dividend investors due to its combination of top dividend stocks, low fees, and high overall yield. And this year, as investors have sought out safe-haven stocks and investments, it's little surprise that the Schwab ETF has flourished; it's up around 15% since the start of the year.
Whether you want a lot of dividend income for your portfolio or just a solid investment to put your money into amid geopolitical and economic uncertainty, the Schwab U.S. Dividend Equity ETF can make for a solid option to consider for both the short and long term.
Should you buy stock 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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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories. The Motley Fool has a disclosure policy.
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