The Schwab U.S. Dividend Equity ETF (SCHD 0.38%) is one of the most popular exchange-traded funds (ETFs) focused on dividend stocks. It currently ranks as the second-largest dividend-focused ETF by assets under management (AUM) at over $72 billion.
One factor driving its popularity is its strong total returns. Here's a look at how much a $1,000 investment made into the fund a decade ago would be worth today.
Image source: Getty Images.
The fund's strategy has paid big dividends
The Schwab U.S. Dividend Equity ETF holds 100 of the top high-yielding dividend stocks. It tracks an index that screens companies for consistent dividend payments and relatively stronger financial profiles compared to their peers. The index also selects companies with strong five-year dividend growth track records.
As a result, the fund provides investors with a relatively high-yielding income stream (nearly a 4% current dividend yield, compared to 1.2% for the S&P 500 index) that steadily increases. The fund also benefits from the underlying earnings and dividend growth of the stocks it holds. That growth steadily raises their share prices, increasing the fund's value.
Over the past 10 years, the fund's share price has risen at an 8.8% average annual rate primarily due to the earnings and dividend growth of its holdings. This growth would have turned a $1,000 investment made a decade ago into $2,330 today through price appreciation alone. Additionally, the fund has distributed a steadily rising stream of dividend income. Reinvesting those dividends would have grown the value of that $1,000 investment to $3,225 today, resulting in an impressive 12.4% average annual total return.
The Schwab U.S. Dividend Equity ETF provides investors with an attractive income stream and the potential for solid price appreciation. It's a high-quality fund that can help anchor any investor's portfolio.
