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.
“At just 0.07%, the U.S. Dividend Equity ETF is perhaps the cheapest of all the dividend equity ETFs. Combine that number with a portfolio that consists of companies with strong dividend growth histories, high yields, healthy balance sheets and loads of cash flow, this ETF is a core holding that you could put in your portfolio and hold forever,” adds ETF Daily News.
For more news and strategy on the Dividend ETF market, visit our Dividends category.
Tom Lydon’s clients own shares of SCHD.