Dividend exchange traded funds have helped investors generate attractive long-term returns. However, investors may want to pare down expectations as dividend growth could slow ahead. As economic growth slows and observers downgrade earnings forecasts, company cash payouts, along with stock buybacks, have also lessened.
That means investors should continue emphasizing quality with their dividend ETF selections. The Schwab US Dividend Equity ETF (NYSEArca: SCHD) includes 100 stocks based on strong fundamentals, dividend yields and consistent dividend payouts for at least 10 consecutive years.
A dividend increase streak is useful for getting investors interested in a stock or ETF, but there has to be more meat on the bone to sustain that dividend growth. SCHD features that added meat by focusing on other quality factors such as return on equity, cash flow to debt ratios, dividend yield and five-year dividend growth. [Why This Dividend Delivers for Investors]
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]
SCHD “deserves serious consideration from retirees. Unfortunately, the dividend yield has fallen below 3% as shares increased in price. The lower yield makes the fund less attractive at current prices, but I still find it attractive enough to own and to add on dips. The general theory investors should be remembering when investing in funds like SCHD is that dividend yield is the dominant consideration,” according to a Seeking Alpha analysis of the ETF.