SCHD merits additional consideration at a time when many market observers are concerned U.S consumer prices, or inflation, are ticking higher.
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.
“While SCHD’s 24.4% weight to consumer staples, a sector that is pricey and rate-sensitive, is potentially concerning as the Fed turns hawkish, the ETF more than offsets its staple exposure with allocations to cyclical sectors that should perform well as rates climb higher. For example, SCHD allocates over 48% of its combined weight to cyclical technology, industrial and energy stocks,” according to InvestorPlace.
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.
For more information on dividend stocks, visit our dividend ETFs category.