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.
Company stocks that issue high dividend yields can be masking their distressed books or may not be sustainable and are heading for dividend cuts. Consequently, these quality dividend ETFs try to limit the impact of these value traps by requiring a history of sustainable dividend growth.
For SCHD, “the sustainability of earnings used to fund dividends is a major consideration. If companies can grow earnings fast enough to grow dividends, SCHD succeeds as a long term investment,” according to Seeking Alpha.
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Schwab US Dividend Equity ETF