Charles Schwab has launched its own dividend exchange traded fund as investors continue to buy equity-income ETFs at a rapid pace.
On a call with reporters Friday, Schwab’s head of proprietary investment product management John Sturiale said there is “definitely a demand for yield in the market” with 10-year Treasury yields hovering around 2%.
“This is a good time to be offering yield to investors,” he said. “We think we’ll see some good demand in the fund.”
Schwab U.S. Dividend Equity ETF (NYSEArca: SCHD) tracks the Dow Jones U.S. Dividend 100 Index. This index is made up of companies that have a record of paying high dividends and have fundamental strength relative to their peers. The index is reviewed annually and revised quarterly.
The new dividend ETF’s strategy looks at the financial strength of the company as well as the dividend yield, while also preventing overconcentration in the utilities and financial sectors, John Sturiale said.
Schwab now manages 15 ETFs and its first offerings are designed to target the main asset classes, he said. The firm has no current plans for more dividend ETFs but would consider offering additional funds if there was client demand, Sturiale added.
Schwab’s new dividend ETF sports low fees, with an expense ratio of 0.17%. The fund can be traded for free, similar to other Schwab ETFs, through online in-house brokerage accounts. [A Quartet of Dividend ETFs]
Dividend ETFs have been raking in the inflows this year. [Vanguard’s High Dividend ETF]
Beth Flynn, head of third-party ETF platform management at Schwab, on Friday’s call said the equity-income category of ETFs represents only 5% of total assets, but has accounted for 11% of year-to-date flows.
Tisha Guerrero and John Spence contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.