The Schwab U.S. Dividend Equity ETF follows the Dow Jones U.S. Dividend 100 Index. This index includes 100 stocks that have increased their dividends every year for at least 10 years in a row. These stocks are picked based on things like the ratio of free cash flow to debt, dividend yield, and dividend growth rate.
The top 100 companies are included in the index. They are weighted by market cap. Right now, some of the largest companies in the index are:
– Verizon Communications
– Cisco Systems
– Lockheed Martin
– ConocoPhillips
– Texas Instruments
This ETF provides a mix of high-yield dividend stocks and stocks with strong growth potential.
The combined yield is about 4%. The forward yield is expected to be even higher. This is because most companies in the index usually increase their payouts each year.
The ETF’s expense ratio is just 0.06%. This low cost makes it cheap to invest in. The ETF’s structure reduces risk from high-yield stocks that may not be fundamentally sound.
Their lower market values will decrease their weight in the index over time.
Schwab ETF delivers long-term income
On the other hand, higher-quality businesses will rise to the top.
Investing $500 per month consistently into this ETF could eventually lead to a large portfolio. Reinvesting quarterly distributions from the ETF will boost returns as shares add up over time. Since it started in 2011, the fund has had an annualized total return of 12.2%.
However, a more conservative estimate for future returns is 9%. Using a 3.5% yield as a future estimate, here’s how a $500 monthly investment could grow:
After 10 years: $100,000 portfolio paying $3,500 in dividends per year
After 20 years: $400,000 portfolio paying $14,000 in dividends per year
After 30 years: $851,000 portfolio paying $30,000 in dividends per year
This scenario assumes constant returns and dividends. In reality, they won’t be linear due to market ups and downs.
The longer you invest, the more likely results will match these projections. It’s important to consider inflation too. $30,000 won’t have the same purchasing power in 30 years.
So investors may need to adjust their contributions over time. In summary, the Schwab U.S. Dividend Equity ETF is a solid choice for investors wanting dividend growth and retirement income. Staying consistent with monthly investments and reinvesting dividends can build a large portfolio that generates significant dividend income over the long run.