As investors continue searching for yield and dependable streams of income, traditional equity-based dividend exchange traded funds should remain part of that conversation. That includes one of the least expensive options in the group, the Schwab US Dividend Equity ETF (NYSEArca: SCHD).
SCHD includes 100 stocks based on strong fundamentals, dividend yields and consistent dividend payouts for at least 10 consecutive years, and it has a 2.90% 12-month yield. SCHD charges just 0.07%%, or $7 per $10,000 invested. Dividend growth as a means of trumping inflation could and arguably should serve to highlight the advantages of the ETFs that focus on dividend growth stocks. That group is comprised of well-established ETFs that emphasize dividend increase streaks as well as a new breed of funds that look for sectors chock full of stocks that have the potential to be future sources of dividend growth.
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.
“The reason SCHD is attractive as a long term investment is the ability of the underlying companies to outperform when the market is trading relatively flat. These dividend champions succeed in these environments because they are emphasizing returning cash to shareholders rather than trying to be the ones to grow the economy,” according to a Seeking Alpha analysis of SCHD.[related_stories]