Like some other major dividend exchange traded funds, the The Schwab US Dividend Equity ETF (NYSEArca: SCHD) has traded lower this year, losing 2.4% as investors have fretted about the impact of rising interest rates on dividend stocks.
But with equity markets rebounding in October, there are reasons to believe SCHD could resume delivering upside for 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 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.
Schwab’s deep distribution network among registered investment advisors and the company’s loyal following among self-directed retail investors have helped buoy SCHD’s growth, but the ETF is gaining traction beyond the Schwab platform.
SCHD’s underlying index screens for companies with average daily dollar volume of at least $2 million, which further enhances liquidity while keeping spreads tight.
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]
SCHD “shows a great collection of stocks that will rarely come up in discussion at any boring social event that you or I might attend. Is that a reason not to hold them? Too often new investors become focused on holding a company because they like something about it, but the thing they should be looking at is the valuation and the expected stream of future income,” according to a Seeking Alpha post.
Schwab US Dividend Equity ETF
Tom Lydon’s clients own shares of SCHD.
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.