Any dividend exchange traded fund worth its should, whether directly or indirectly, have some emphasis on quality. The Schwab US Dividend Equity ETF (NYSEArca: SCHD) does and SCHD’s approach to consistency and quality has made it popular with frugal income investors.
SCHD tracks the Dow Jones U.S. Dividend 100 Index, which not only features some of the largest U.S. dividend payers, but also only those companies with at least 10 years of increased payouts, a familiar trait among some dividend funds. [Quality Lifts This Dividend ETF]
SCHD “has a (slightly) above-average current yield, it has experienced above-average dividend growth, and it has a lower-than-average fee,” notes Ben Johnson, Morningstar’s global director of manager research for passive strategies.
Indee, SCHD makes good on the promise of low fees. With its expense ratio of 0.07% per year, SCHD is the least expensive dividend ETF on the market today. Schwab clients can realize additional cost savings because SCHD, like all other Schwab ETF’s, is available commission-free on the firm’s ETF OneSource platform.
Due to the ETF’s indexing methodology, SCHD includes quality names, with 60% of its holdings exhibiting wide economic moats – a competitive advantage or dominant market position that a company has over rivals. Specifically, these companies have stable earnings, high profitability, low debt and healthy dividends. [Quality Dividend ETFs]
As highlighted by the decade-long dividend increase requirement, SCHD takes dividend growth seriously and the ETF’s holdings affirm as much.