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Yahoo
4 days ago
- Business
- Yahoo
This ETF Could Turn $500 Per Month Into a $851,000 Portfolio Paying $30,000 in Annual Dividend Income
This ETF invests in high-quality dividend stocks. It currently offers a high yield, despite a 12.2% annualized return since 2011. It's one of the simplest and most effective ways to build a portfolio of high-quality dividend payers. 10 stocks we like better than Schwab U.S. Dividend Equity ETF › Many investors aspire to build a portfolio that can pay them enough in dividends to fund their retirement goals. If you can find stocks that consistently raise their dividends, typically offsetting the impact of inflation and then some, you could find yourself in the enviable position where you can leave your principal investment untouched. Instead, you get to live off your dividends and pass along your stocks to your heirs or donate them to charity. But building a portfolio of high-quality dividend stocks isn't easy. Fortunately, there's one exchange-traded fund (ETF) that can take care of it for you. And if you invest early and consistently until retirement, you could end up with a portfolio worth over $850,000 that pays out around $30,000 in annual dividends. Two simple factors that can help investors find companies that are likely to raise their dividends in the future are management's history of dividend increases and the company's financial health. If management has consistently increased the dividend and has the financial ability to keep doing so, it's very likely to continue the streak. That's why the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) is an effective way to invest in high-yield dividend growth stocks. The index fund follows the Dow Jones U.S. Dividend 100 Index, which selects 100 stocks that have each increased their dividend annually for at least 10 consecutive years. It ranks each eligible company by several criteria: the ratio of free cash flow to debt, return on equity, dividend yield, and dividend growth rate. The top 100 companies (based on a composite ranking of all four criteria) are included in the index and weighted by market cap. As of this writing, the 10 largest companies (and their dividend yields) in the index are as follows: Coca-Cola (2.8%) Verizon Communications (6.2%) Altria (6.8%) Cisco Systems (2.6%) Lockheed Martin (2.8%) ConocoPhillips (3.7%) Home Depot (2.5%) Chevron (5.1%) Texas Instruments (3%) Abbvie (3.6%) As you can see, you get a mix of high-yield dividend stocks along with stocks that have strong growth supporting future payout increases. The result is a combined yield of about 4% based on trailing-12-month distributions from the ETF. But the forward yield should be even higher considering most constituents will pay out more over the next year than the previous year. With an expense ratio of just 0.06%, the cost of investing in this ETF is low and in line with some of the most popular index funds on the market. The Dow Jones dividend index's decision to weight constituents by market cap (with a 4% weight limit) makes it a very efficient index to track, and it lowers the risk tied to any high-yield stocks that aren't as fundamentally sound as the screener suggests. If the market bids down the value of those stocks, they will comprise a lower percentage of the index over time, while the high-quality businesses rise to the top. Consistently investing $500 per month into the Schwab U.S. Dividend Equity ETF will eventually produce a sizable portfolio. Automatically reinvesting the quarterly distribution from the ETF will ensure a good total return on your investments as you accumulate shares over time. Since its inception in 2011, the fund has produced an annualized total return of 12.2%. That's an exceptional performance, but it's also worth pointing out the S&P 500 index has beaten the ETF with an annualized total return of 14.5%. The gap between the two has widened recently due to the outperformance of growth stocks since 2023. Historically, the S&P 500 averages returns around 10% per year, and 9% is more appropriate as a conservative estimate of the ETF's annual total return. The ETF's 4% distribution yield is also relatively high, but it may come down over time as the Federal Reserve lowers interest rates. That said, there's no telling what prevailing interest rates will be well into the future. A 3.5% yield is a reasonable estimate for the ETF's future yield. With those assumptions in mind, here's how a $500 monthly investment in the Schwab U.S. Dividend Equity ETF could grow over time if you automatically reinvest dividends. Years Investing Portfolio Value Forward Dividend Payment 1 $6,245 $219 5 $37,368 $1,308 10 $94,862 $3,320 15 $183,323 $6,416 20 $319,431 $11,180 25 $528,851 $18,510 30 $851,070 $29,787 Calculations by author. There are a few important caveats to the above scenario. First of all, it's based on forecasts for expected returns and dividend yields that could be well off the mark. More importantly, those returns won't be linear over time. The market is full of ups and downs. The sequence and size of those ups and downs could have a tremendous impact on the final result of your investments. That said, the longer your holding period, the more likely your results will look like the table above. Another important consideration is the impact of inflation: $30,000 won't have the same buying power in 30 years as it has today. That means investors will have to adjust their expectations or strategy if they want future purchasing power equivalent to $30,000 today. That could mean consistently increasing the monthly contribution, for example. While your actual results may vary from the above table, the key takeaway for most investors is to get started and remain consistent. The Schwab U.S. Dividend Equity ETF is a great option if you seek dividend growth and income in retirement. Before you buy stock in Schwab U.S. Dividend Equity ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Schwab U.S. Dividend Equity ETF wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $651,049!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $828,224!* Now, it's worth noting Stock Advisor's total average return is 979% — a market-crushing outperformance compared to 171% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of June 2, 2025 Adam Levy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie, Chevron, Cisco Systems, Home Depot, and Texas Instruments. The Motley Fool recommends Lockheed Martin and Verizon Communications. The Motley Fool has a disclosure policy. This ETF Could Turn $500 Per Month Into a $851,000 Portfolio Paying $30,000 in Annual Dividend Income was originally published by The Motley Fool
Yahoo
4 days ago
- Business
- Yahoo
This ETF Could Turn $500 Per Month Into a $851,000 Portfolio Paying $30,000 in Annual Dividend Income
This ETF invests in high-quality dividend stocks. It currently offers a high yield, despite a 12.2% annualized return since 2011. It's one of the simplest and most effective ways to build a portfolio of high-quality dividend payers. 10 stocks we like better than Schwab U.S. Dividend Equity ETF › Many investors aspire to build a portfolio that can pay them enough in dividends to fund their retirement goals. If you can find stocks that consistently raise their dividends, typically offsetting the impact of inflation and then some, you could find yourself in the enviable position where you can leave your principal investment untouched. Instead, you get to live off your dividends and pass along your stocks to your heirs or donate them to charity. But building a portfolio of high-quality dividend stocks isn't easy. Fortunately, there's one exchange-traded fund (ETF) that can take care of it for you. And if you invest early and consistently until retirement, you could end up with a portfolio worth over $850,000 that pays out around $30,000 in annual dividends. Two simple factors that can help investors find companies that are likely to raise their dividends in the future are management's history of dividend increases and the company's financial health. If management has consistently increased the dividend and has the financial ability to keep doing so, it's very likely to continue the streak. That's why the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) is an effective way to invest in high-yield dividend growth stocks. The index fund follows the Dow Jones U.S. Dividend 100 Index, which selects 100 stocks that have each increased their dividend annually for at least 10 consecutive years. It ranks each eligible company by several criteria: the ratio of free cash flow to debt, return on equity, dividend yield, and dividend growth rate. The top 100 companies (based on a composite ranking of all four criteria) are included in the index and weighted by market cap. As of this writing, the 10 largest companies (and their dividend yields) in the index are as follows: Coca-Cola (2.8%) Verizon Communications (6.2%) Altria (6.8%) Cisco Systems (2.6%) Lockheed Martin (2.8%) ConocoPhillips (3.7%) Home Depot (2.5%) Chevron (5.1%) Texas Instruments (3%) Abbvie (3.6%) As you can see, you get a mix of high-yield dividend stocks along with stocks that have strong growth supporting future payout increases. The result is a combined yield of about 4% based on trailing-12-month distributions from the ETF. But the forward yield should be even higher considering most constituents will pay out more over the next year than the previous year. With an expense ratio of just 0.06%, the cost of investing in this ETF is low and in line with some of the most popular index funds on the market. The Dow Jones dividend index's decision to weight constituents by market cap (with a 4% weight limit) makes it a very efficient index to track, and it lowers the risk tied to any high-yield stocks that aren't as fundamentally sound as the screener suggests. If the market bids down the value of those stocks, they will comprise a lower percentage of the index over time, while the high-quality businesses rise to the top. Consistently investing $500 per month into the Schwab U.S. Dividend Equity ETF will eventually produce a sizable portfolio. Automatically reinvesting the quarterly distribution from the ETF will ensure a good total return on your investments as you accumulate shares over time. Since its inception in 2011, the fund has produced an annualized total return of 12.2%. That's an exceptional performance, but it's also worth pointing out the S&P 500 index has beaten the ETF with an annualized total return of 14.5%. The gap between the two has widened recently due to the outperformance of growth stocks since 2023. Historically, the S&P 500 averages returns around 10% per year, and 9% is more appropriate as a conservative estimate of the ETF's annual total return. The ETF's 4% distribution yield is also relatively high, but it may come down over time as the Federal Reserve lowers interest rates. That said, there's no telling what prevailing interest rates will be well into the future. A 3.5% yield is a reasonable estimate for the ETF's future yield. With those assumptions in mind, here's how a $500 monthly investment in the Schwab U.S. Dividend Equity ETF could grow over time if you automatically reinvest dividends. Years Investing Portfolio Value Forward Dividend Payment 1 $6,245 $219 5 $37,368 $1,308 10 $94,862 $3,320 15 $183,323 $6,416 20 $319,431 $11,180 25 $528,851 $18,510 30 $851,070 $29,787 Calculations by author. There are a few important caveats to the above scenario. First of all, it's based on forecasts for expected returns and dividend yields that could be well off the mark. More importantly, those returns won't be linear over time. The market is full of ups and downs. The sequence and size of those ups and downs could have a tremendous impact on the final result of your investments. That said, the longer your holding period, the more likely your results will look like the table above. Another important consideration is the impact of inflation: $30,000 won't have the same buying power in 30 years as it has today. That means investors will have to adjust their expectations or strategy if they want future purchasing power equivalent to $30,000 today. That could mean consistently increasing the monthly contribution, for example. While your actual results may vary from the above table, the key takeaway for most investors is to get started and remain consistent. The Schwab U.S. Dividend Equity ETF is a great option if you seek dividend growth and income in retirement. Before you buy stock in Schwab U.S. Dividend Equity ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Schwab U.S. Dividend Equity ETF wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $651,049!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $828,224!* Now, it's worth noting Stock Advisor's total average return is 979% — a market-crushing outperformance compared to 171% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of June 2, 2025 Adam Levy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie, Chevron, Cisco Systems, Home Depot, and Texas Instruments. The Motley Fool recommends Lockheed Martin and Verizon Communications. The Motley Fool has a disclosure policy. This ETF Could Turn $500 Per Month Into a $851,000 Portfolio Paying $30,000 in Annual Dividend Income was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
30-05-2025
- Business
- Yahoo
Why I Can't Stop Buying This 4%-Yielding Dividend ETF for Passive Income
The Schwab U.S. Dividend Equity ETF currently has a 4% yield. The fund owns 100 high-quality, high-yield dividend stocks with excellent records of increasing their payouts. It should supply me with a lucrative and growing passive income stream and price appreciation potential. 10 stocks we like better than Schwab U.S. Dividend Equity ETF › I love to collect passive income. I don't have to work for it, and it provides me with additional money to invest. Eventually, this strategy will allow me to retire and live off my passive income. I invest in a variety of income-generating investments. One that I can't stop buying these days is the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD). This exchange-traded fund (ETF) currently has a 4% dividend yield, which is about triple the S&P 500's dividend yield of around 1.3%. That enables me to generate more passive income from every dollar I invest. The fund also has an excellent record of increasing its payments. Because of that, it should provide me with lots of passive income in the future, which is why I just can't stop adding to my position. The Schwab U.S. Dividend Equity ETF has a very simple strategy. The ETF aims to track the total return of the Dow Jones U.S. Dividend 100 Index. That underlying index screens stocks based on four dividend quality attributes: Cash flow to total debt Return on equity (ROE) Dividend yield Five-year dividend growth rate The index uses these metrics to select the 100 best stocks based on their ability to pay sustainable, high-yielding dividends that should grow at above-average rates. It runs this screen once a year to reconstitute its holdings. It will remove lower-quality dividend stocks and replace them with companies offering higher-quality payouts. At its last annual refresh in March, the 100 holdings had an average dividend yield of 3.8% and had grown their payouts at an average annual rate of 8.4% over the past five years. That provides investors with a nice blend of current income and growth potential. Among the notable additions was oil giant ConocoPhillips (NYSE: COP). It currently ranks as the sixth-largest holding of the Schwab U.S. Dividend Equity ETF. The oil company has a 3.7% dividend yield. It has been growing its payout at a robust rate in recent years (34% in 2024, 14% in 2023, and 11% in 2022). ConocoPhillips aims to deliver dividend growth within the top 25% of companies in the S&P 500 in the future. It should have plenty of fuel to achieve that above-average growth rate. The oil company expects its investments in LNG and Alaska to drive $6 billion in incremental free cash flow over the next few years, putting it on track to deliver sector-leading growth through 2029. The Schwab U.S. Dividend Equity ETF's focus on dividend growth has paid off for its investors. While dividend payments fluctuate from quarter to quarter, they've steadily risen over the years: As a result, fund investors collect a lucrative and steadily rising income stream. That has helped contribute to its strong total returns (dividend income plus stock price appreciation) over the longer term: Fund 1-Year Return 3-Year Return 5-Year Return 10-Year Return Since Inception (10/20/2011) Schwab U.S. Dividend Equity ETF 6.75% 4.91% 16.29% 10.55% 12.10% Data source: Schwab. The fund's long-term performance aligns with the historical returns of dividend growth stocks. Over the last 50 years, dividend growers have delivered an average annual return of 10.2%, according to data from Ned Davis Research and Hartford Funds. They have significantly outperformed companies with no change in their dividend policy (6.8%), non-payers (4.3%), and cutters and eliminators (-0.9%). While that past performance doesn't guarantee the future of dividend stocks or that the fund will produce strong returns in the future, it does bode well for investors. I'm working hard to grow my passive income and net worth to have a comfortable retirement. The Schwab U.S. Dividend Equity ETF aligns perfectly with those goals. It will provide me with an attractive and rising passive income stream and healthy price appreciation potential. That's why I just can't stop buying this top-notch dividend ETF. I'll likely continue adding to my position each month as I march toward my passive income target. Before you buy stock in Schwab U.S. Dividend Equity ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Schwab U.S. Dividend Equity ETF wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $651,761!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $826,263!* Now, it's worth noting Stock Advisor's total average return is 978% — a market-crushing outperformance compared to 170% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 19, 2025 Matt DiLallo has positions in ConocoPhillips and Schwab U.S. Dividend Equity ETF. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Why I Can't Stop Buying This 4%-Yielding Dividend ETF for Passive Income was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
14-05-2025
- Business
- Yahoo
1 No-Brainer Dividend Index Fund to Buy Right Now for Less Than $500 -- and Another Dividend Fund Yielding 11%
You can invest in individual dividend-paying stocks, but opting for a dividend-focused ETF makes it easier. The Schwab U.S. Dividend Equity ETF has a solid track record and a respectable yield. The relatively new, and actively managed, JPMorgan Equity Premium Income ETF has performed well. 10 stocks we like better than Schwab U.S. Dividend Equity ETF › Two of the best things in the investment world are index funds and dividend-paying stocks. So an even better thing, arguably, would be a dividend-focused index fund. Here's a look at a well-regarded index exchange-traded fund (ETF) that recently boasted a yield of 4%. (ETFs are funds that trade like stocks, making it easy to get in and out of them.) I'll also offer for your consideration a more aggressive income-oriented ETF that recently sported a dividend yield of 11%. Check them out and see whether either or both would be a good fit for your portfolio. You can invest in either with less than $500 -- or with more. Dividend-paying stocks used to be thought of by many people as mainly suitable for grandparents -- but that's increasingly not the case as more investors wake up to their appeal. Consider these eye-opening numbers. Dividend-Paying Status Average Annual Total Return, 1973-2024 Dividend growers and initiators 10.24% Dividend payers 9.20% No change in dividend policy 6.75% Dividend non-payers 4.31% Dividend shrinkers and eliminators (0.89%) Equal-weighted S&P 500 index 7.65% Data source: Ned Davis Research and Hartford Funds. You can, of course, study the universe of stocks and carefully choose promising dividend-paying stocks for your portfolio. But you might instead make it easy on yourself by just investing in a good fund that does that work for you. The Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) is a compelling pick for multiple reasons. Let's start with its expense ratio (annual fee), which is just 0.06%. That means you'll only pay $6 a year for every $10,000 you have invested in the fund. The ETF tracks the Dow Jones U.S. Dividend 100 Index -- which encompasses 100 stocks with track records of paying dividends for at least 10 years and which also appear financially healthy. That last part, based on factors such as cash flow to total debt and return on equity, is important, because companies that aren't financially healthy may at some point need to reduce their dividends. Here's how the fund has performed in the past. Period Average annual gain Past 3 years 4.58% Past 5 years 12.76% Past 10 years 10.47% Since inception (Oct. 20, 2011) 12.19% Source: as of May 8, 2025. Pretty good, right? Note, though, that the next five or 10 years might feature lower (or higher) returns. The S&P 500 has averaged annual total returns of close to 10% (ignoring inflation) over long periods, and the past few years have featured higher-than-average returns. Another thing to like about the fund is its relatively hefty dividend yield, recently 4%. Plunk $10,000 into this ETF and you can expect somewhere around $400 in dividends over the course of the next year. As the companies in the Dow Jones U.S. Dividend 100 Index grow over time, many of them will be increasing their dividends, so you can generally expect to collect more in dividend income from year to year. So what's in this ETF? Here are its top 10 holdings as of May 8. Stock Weight in ETF Recent yield Coca-Cola 4.47% 2.8% Verizon Communications 4.43% 6.2% Altria Group 4.42% 6.7% ConocoPhillips 4.27% 3.6% Lockheed Martin 4.25% 2.8% Home Depot 4.06% 2.5% Cisco Systems 4.03% 2.8% Chevron 3.89% 5.0% AbbVie 3.84% 3.5% Amgen 3.77% 3.5% Source: and Figures as of May 8, 2025. These 10 holdings together make up about 41% of the ETF's value. About 20% of its assets are in consumer defensive stocks, 19% in energy stocks, and nearly 15% in healthcare stocks. If you're looking for much more income from your investments, you might want to take a look at the JPMorgan Equity Premium Income ETF (NYSEMKT: JEPI). It's fairly new, with an inception date of May 20, 2020, and it has drawn a lot of interest with its dividend yield, recently 7.8% (on a 12-month rolling basis). As you might be starting to suspect, the JPMorgan Equity Premium Income ETF is not a standard dividend ETF. It claims to be the world's largest actively managed ETF (as opposed to being an index fund, or index ETF), and here's how it describes itself: Designed to provide current income while maintaining prospects for capital appreciation. Generates income through a combination of selling options and investing in U.S. large cap stocks, seeking to deliver a monthly income stream from associated option premiums and stock dividends. Seeks to deliver a significant portion of the returns associated with the S&P 500 Index with less volatility, in addition to monthly income. So what's its strategy? Well, it holds lots of stocks (recently around 113) chosen by its managers. On top of that, it uses equity-linked notes and covered calls (a kind of option) to add to its performance. Take a closer look at this ETF if it interests you. Understand that its performance can vary along with the economic environment. Its expense ratio is 0.35%, costing you $35 annually per $10,000 invested in the fund. Whether you take the more straightforward route of investing for dividend income or you park some money in the JPMorgan ETF, be sure that you are saving and investing for retirement. Before you buy stock in Schwab U.S. Dividend Equity ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Schwab U.S. Dividend Equity ETF wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $598,613!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $753,878!* Now, it's worth noting Stock Advisor's total average return is 922% — a market-crushing outperformance compared to 169% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 12, 2025 Selena Maranjian has positions in AbbVie, Altria Group, Amgen, Schwab U.S. Dividend Equity ETF, and Verizon Communications. The Motley Fool has positions in and recommends AbbVie, Amgen, Chevron, Cisco Systems, and Home Depot. The Motley Fool recommends Lockheed Martin and Verizon Communications. The Motley Fool has a disclosure policy. 1 No-Brainer Dividend Index Fund to Buy Right Now for Less Than $500 -- and Another Dividend Fund Yielding 11% was originally published by The Motley Fool
Yahoo
27-04-2025
- Business
- Yahoo
Got $1,000 to Invest? Buying This Simple ETF Could Turn It Into a More Than $40 Annual Stream of Passive Income.
Investing in the stock market can seem like a daunting task. There are so many options available. Making matters worse, there's so much uncertainty in the air these days with tariffs and their potential impact on the economy and stock market. If you're feeling nervous about stocks and picking individual ones, one solution is to invest in a top exchange-traded fund (ETF). These investment vehicles can provide broad exposure to the market's long-term upside with less risk. A simple one to start with is the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD). It holds a portfolio of high-quality dividend stocks that can provide investors with a tangible return during uncertain times in the form of dividend income. For example, investing $1,000 into this fund would at its current payout produce about $40 of dividend income each year. That's only part of the draw, which is why it's such a great fund to buy right now. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue » The Schwab U.S. Dividend Equity ETF has a very simple strategy. It tracks an index (Dow Jones U.S. Dividend 100 Index) that screens companies based on the quality of their dividends and financial profiles. The result is a list of 100 companies with higher dividend yields, strong dividend growth rates, and healthy financial profiles. For example, the fund's top holding is Coca-Cola (NYSE: KO). The beverage giant currently has a dividend yield of nearly 3%, which is about double the yield of the broader market (the S&P 500's dividend yield is less than 1.5%). Coca-Cola increased its dividend payment by 5.2% earlier this year. That marked the 63rd consecutive year it increased its dividend. It's part of the elite group of Dividend Kings, companies with 50 or more years of annual dividend growth. The company backs its dividend with strong free cash flow and a top-notch balance sheet. At the fund's annual rebalancing last month, its holdings had an average dividend yield of 3.8%. That yield has crept up as the stock market (and the ETF's value) has declined in recent weeks and is now up over 4%. At that rate, a $1,000 investment in the fund would produce more than $40 of annual passive income. Meanwhile, the current group of holdings has delivered an average dividend growth rate of 8.4% over the past five years. Because of that, the ETF should steadily pay out more cash as its holdings continue increasing their payouts: The likely growing stream of dividend income supplied by the Schwab U.S. Dividend Equity ETF provides investors with a solid base cash return. While the payment will ebb and flow each quarter based on when the underlying companies make their dividend payments, it should continue to steadily head higher as they grow their dividends. Given the strength of their financial profiles, these companies should continue increasing their payouts even if there's a recession. That rising income stream is only part of the return. The share prices of the companies held by the fund should increase in the future as they grow their earnings in support of their rising dividends. Over the long term, dividend growth stocks have historically produced excellent total returns. According to data from Hartford Funds and Ned Davis Research, dividend growers and initiators have delivered an average annual return of 10.2% over the past 50 years. That has outperformed companies with no change in their dividend policy (6.8%), non-dividend payers (4.3%), and dividend cutters and eliminators (-0.9%). The Schwab U.S. Dividend Equity ETF has delivered similarly strong returns throughout its history. It has produced an 11.4% annualized return over the past decade and 12.9% since its inception in 2011. While there's no guarantee it will earn returns at those levels in the future, its focus on the top dividend growth stocks puts it in an excellent position to continue delivering strong returns for investors. With the stock market slumping this year, shares of the Schwab U.S. Dividend Equity ETF are down about 15% from the high point earlier in the year. That's a great entry point for this high-quality fund. It positions investors to generate lots of dividend income while potentially capturing strong total returns over the long term. Before you buy stock in Schwab U.S. Dividend Equity ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Schwab U.S. Dividend Equity ETF wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $591,533!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $652,319!* Now, it's worth noting Stock Advisor's total average return is 859% — a market-crushing outperformance compared to 158% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of April 21, 2025 Matt DiLallo has positions in Coca-Cola and Schwab U.S. Dividend Equity ETF. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Got $1,000 to Invest? Buying This Simple ETF Could Turn It Into a More Than $40 Annual Stream of Passive Income. was originally published by The Motley Fool Sign in to access your portfolio
