The Schwab U.S. Dividend Equity ETF (SCHD 0.14%) has been a terrific performer over the longer term. The dividend-focused ETF has delivered a more than 10% average annualized total return in each of the last three-, five-, and 10-year periods as well as since its inception in 2011.
The past year has been a different story, as the fund's return is a negative 0.8%. However, given its past success and investment focus, it stands out as one of the top ETFs to buy today.
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Focused on investing in high-performing stocks
The Schwab U.S. Dividend Equity ETF tracks an index that measures the returns of 100 top high-yield dividend stocks. It screens companies based on several dividend quality characteristics, including dividend yield and five-year dividend growth rate. The fund's current holdings have an average annualized dividend yield approaching 4% (well above the S&P 500's 1.2% yield) and have grown their payouts at a more than 8% average annual rate over the last five years.
Dividend growth has historically had a meaningful impact on a stock's total return over the long term. According to data from Ned Davis Research and Hartford Funds, stocks in the S&P 500 that paid a growing dividend delivered an average annual total return of 10.2%. That was a much higher return compared to companies that didn't pay dividends (4.3%) and those that didn't increase their payouts (6.8%).
NYSEMKT: SCHD
Key Data Points
Dividend stocks are currently out of favor with investors as they focus on exciting growth sectors like AI. However, they're proven winners over the long term. That makes the Schwab U.S. Dividend Equity ETF look like a very attractive investment opportunity right now. It could produce strong total returns in the coming years as its holdings increase their payouts and investor sentiment shifts back toward these powerful long-term wealth creators.
