“Targeting the highest-yielding companies dilutes the benefits associated with a dividend strategy. Stocks usually provide high yields when their prices have been lowered because of distress in the economy or in anticipation of bland earnings growth or dividend cuts. Too high a yield can also indicate the market’s skepticism as to whether a payout is sustainable, and the market is usually right. Over the past 85 years, the highest-yielding quintile of stocks did not produce the best return or risk-adjusted return,” according to Morningstar’s Woodham.
SCHD offers other advantages, particularly for frugal investors. The ETF’s annual expense ratio of 0.07% is rock-bottom among dividend funds. It is even slightly cheaper than the rival Vanguard products and Schwab clients can trade SCHD commission-free. [Schwab Adds ETFs to Commission-Free Lineup]
Schwab US Dividend Equity ETF
Tom Lydon’s clients own shares of SCHD.