Want Decades of Passive Income? Buy This ETF and Hold It Forever.
Key Points
It's hard for investors to complain about this ETF’s 3.25% dividend yield, which is three times bigger than what the S&P 500 index offers.
Established businesses with consistent earnings power and dividend streaks are included.
The uncertain backdrop provides a compelling argument to buy and hold this ETF.
- 10 stocks we like better than Schwab U.S. Dividend Equity ETF ›
Given the market's remarkable performance over the past decade, it's hard not to remain bullish about the prospects of rising equity prices. However, some investors greatly appreciate the reliability of dividends as an important part of the returns that they are able to achieve. This is a reasonable view of the stock market.
Are you looking to generate decades of passive income? Consider this exchange-traded fund (ETF) as a forever holding in your portfolio.
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Capturing a 3.25% dividend yield
If you're after a durable stream of income that you can count on for a long period of time, you've come to the right place. It's smart to consider the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD). As the name suggests, it's offered by massive asset manager Charles Schwab. And it carries an extremely attractive expense ratio of just 0.06%.
This ETF tracks the Dow Jones U.S. Dividend 100, which means it holds 100 stocks. Businesses must have a market capitalization of at least $500 million. And they must have paid dividends for at least 10 years straight.
Once a list of companies that pass this screen has been assembled, they are ranked based on four financial metrics. These include cash flow to total debt, return on equity, dividend yield, and five-year dividend growth rate. The top 100 are chosen to be included in this index.
The S&P 500 (SNPINDEX: ^GSPC) pays a dividend yield of 1.07%. Over the past 12 months, the Schwab U.S. Dividend Equity ETF has posted a distribution yield of 3.25%, more than three times that of the widely followed benchmark. Even more impressive is the fact that the ETF's payout has risen 211% over the trailing-10-year period.
That rising passive income stream is a compelling proposition. Because the Schwab U.S. Dividend Equity ETF owns businesses with strong industry positions and steady earnings, such as UnitedHealth Group, Merck, and Home Depot (its top three holdings), investors can bank on dividend consistency.
Uncertainty is the only constant
The Schwab U.S. Dividend Equity ETF is showing why it can be a smart addition to a portfolio. In 2026, it has produced a total return of 18.9% (as of June 29). On the other hand, the S&P 500 index has generated a total return of 8.1%.
That outperformance, while over a short time frame, is notable. Right now, investors are dealing with a highly uncertain backdrop. Ongoing geopolitical risks, above-average inflation, and the rise of artificial intelligence can spark a flight to safety. The Schwab U.S. Dividend Equity ETF can help to address this concern.
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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*Stock Advisor returns as of July 3, 2026.
Charles Schwab is an advertising partner of Motley Fool Money. Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot and Merck. The Motley Fool recommends Charles Schwab and UnitedHealth Group and recommends the following options: short September 2026 $95 calls on Charles Schwab. The Motley Fool has a disclosure policy.
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