Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect strong dividend-paying stocks to rise in value over time while kicking out income to investors, the brand-new Schwab U.S. Dividend Equity ETF (NYSE: SCHD ) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.
The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The Schwab ETF's expense ratio -- its annual fee -- is a very low 0.17%. It's also a good reason to consider this ETF versus other dividend-focused ETFs, despite its young age and small current size.
This ETF has little performance to speak of so far, but a look at its components reveals plenty of stocks that have fared reasonably well in recent years, considering our difficult economic conditions. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
What's in it?
Several of this ETF's components have done well over the past year and may contribute to the ETF's performance in the coming year. Caterpillar (NYSE: CAT ) , for example, gained about 19% over the past year, posting big jumps in demand for its offerings and enjoying an all-time high in its order backlog. It has also been enjoying strong growth from emerging markets, as have competitors such as Manitowoc (NYSE: MTW ) .
Intel (Nasdaq: INTC ) is up 21%, and for such a big blue-chip company, its current low price and sizable dividend payout are reason alone to give it strong consideration. It's also enjoying fat profit margins and continuing to thwart rival Advanced Micro Devices (Nasdaq: AMD ) .
Other companies didn't do as well in the past year but could add to the ETF's returns in the years to come. Boeing (NYSE: BA ) , for example, shed about 1%, despite big relief that it finally released its new 787 Dreamliner. But it's not likely to reap big profits from it in the near term. United Technologies (NYSE: UTX ) was up just 5% over the past year, but some don't love its plan to gobble up Goodrich.
The big picture
A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.
Learn about the best dividend ETFs. And if you're looking for some great investments beyond ETFs, consider these 10 Stocks for Your Retirement Portfolio.
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