In our latest exploration of retirement income strategies at WiseWallet.info, we have taken a closer look at the merits of dividend income funds versus annuities. Building on this discussion, we want to introduce you to one of the best dividend income funds/ETFs that could potentially fit into your diversified retirement income strategy. Our essential research summary will provide you with the key insights you need to make an informed decision.
What?
The Schwab US Dividend Equity ETF (Symbol: SCHD) is a prime example of a dividend income fund, focusing on high dividend yields combined with the stability of U.S. equity. SCHD targets the Dow Jones U.S. Dividend 100 Index, selecting stocks based on their dividend yield, financial health, and sustainability. This ETF is designed for investors seeking income through dividends, along with potential capital appreciation.
So What?
Let's look at the details of the Schwab US Dividend Equity ETF (Symbol: SCHD). The values quoted below are as of 3/21/2024 [1].
Style: Passive
Index Followed: the Dow Jones U.S. Dividend 100™ Index.
Fund Inception: 10/20/2011
Net Assets: $55.6 B
Expense Ratio: 0.06%
TTM (Trailing 12 Months) Yield: 3.41% (vs. 1.29% of SPY, the largest S&P500 ETF)
5-Year Annualized Return: 12.22%
10-Year Annualize Return: 11.34%
Annualized Return Since Inception: 13.03%
Morningstar Rating: 5 Stars
In summary, SCHD is an excellent passive ETF with a very large net assets, very low expense ratio, high dividend yield, and strong long-term growth.
The chart below shows the 10-year cumulative growth of a $10,000 investment as of 02/29/2024.
Blue Line: SCHD = $28,709
Gray Line: Dow Jones U.S. Dividend 100 Index = $28,965
Black Line: Morningstar Large Value Category = $22,129
Vertical Red Band: Worst Three Months Return (12/31/2019 - 3/31/2020) = -21.55%
Vertical Green Band: Best Three Months Return (1/31/2021 - 4/30/2021) = +18.01%
SCHD is tracking the underlying Dow Jones U.S. Dividend 100 Index very closely. SCHD is clearly outperforming the Morningstar's Large Value Category. But its performance was impacted by the large swings in the stock market during the Covid pandemic, which is inevitable in any equity-based ETFs/funds.
Now What?
For those considering integrating SCHD into their retirement portfolio,
Assess Your Risk Tolerance: Understand that while SCHD provides steady dividend income, it's subject to market fluctuations.
Consider Your Income Needs: Evaluate how SCHD's dividends complement other income sources.
Diversify: While SCHD is diversified, ensure it fits within a broader, balanced investment strategy.
Concluding Remarks
SCHD stands out as a robust investment vehicle for those prioritizing income and growth in their investment portfolios. Its strategic focus on dividend-paying stocks, coupled with a history of resilience and performance, underscores its potential as a cornerstone in retirement planning. As always, investors should perform their due diligence and consider how such investments align with their overall financial goals.
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