The term Dividend Kings is a special title bestowed upon stocks with impressive, decades-long streaks (at least 50 years) of uninterrupted dividend growth. Such shares can often be perfect for investors seeking steady and predictable income from their portfolios.
Dividend growth exchange-traded funds (ETFs) work a little differently. Because they make periodic additions and deletions from their portfolios and payout schedules from the underlying companies can vary, these funds can see their payouts fluctuate, even the ones dedicated to long-term dividend growers.
But several dividend ETFs have built up strong track records of long-term dividend growth themselves. In some cases, those streaks can reach a decade or longer. One of the most prominent examples of this is the Schwab U.S. Dividend Equity ETF (SCHD +0.16%).
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How the Schwab U.S. Dividend Equity ETF achieves dividend growth
The Schwab takes a very targeted approach to selecting stocks for its portfolio. In order to even be considered, a stock must have 10 consecutive years of dividend payments. This isn't necessarily a dividend "growth" screen, but many companies that have paid a dividend for this long have often grown it consistently along the way.
After that, stocks must have an above-average yield within its starting universe. Qualifying components up to this point are then screened using four characteristics: return on equity (ROE), cash-flow-to-debt ratio, dividend yield, and five-year dividend growth rate. The 100 stocks with the best combination of these factors makes the final portfolio. Those stocks get weighted by market capitalization.
While SCHD's selection methodology doesn't have a strict dividend growth requirement, a portfolio analysis shows that about 85% of the fund's components have grown their dividends for at least 10 years. That kind of composition is an ideal setup for years of consistent dividend growth. And the Schwab U.S. Dividend Equity ETF has delivered.
The Schwab U.S. Dividend Equity ETF's dividend growth history
Here's how much SCHD has distributed in dividends annually since its October 2011 inception.
| Year | Dividends per Share |
|---|---|
| 2024 | $0.9944 |
| 2023 | $0.8860 |
| 2022 | $0.8538 |
| 2021 | $0.7497 |
| 2020 | $0.6761 |
| 2019 | $0.5747 |
| 2018 | $0.4798 |
| 2017 | $0.4486 |
| 2016 | $0.4193 |
| 2015 | $0.3822 |
| 2014 | $0.3490 |
| 2013 | $0.3013 |
| 2012 | $0.2700 |
| 2011 | $0.0406 |
Source: Charles Schwab.
The fund has grown its annual payout every year that it's been in existence. Through the first three quarters of 2025, SCHD has paid out $0.7694 per share. If its fourth-quarter dividend distribution (due in late December) comes in at $0.23 or greater, the fund will extend its streak to 14 consecutive years.
Why SCHD still has value
One of the cornerstones of this fund's portfolio is that it's full of durable, mature cash-flow generators. Those companies are often more defensive and have more of a value tilt than the broader market.
The Schwab U.S. Dividend Equity ETF's top five sector holdings as of Dec. 1 are energy (19.3%), consumer staples (18.5%), healthcare (16.1%), industrials (12.3%), and financials (9.4%). The top five holdings are Merck, Amgen, Cisco Systems, AbbVie, and Coca-Cola.
These aren't the "Magnificent Seven" or artificial intelligence stocks that have produced big returns over the past few years, but they've been great for those seeking steady and growing income.
NYSEMKT: SCHD
Key Data Points
SCHD currently trades at a price-to-earnings (P/E) ratio of 16.7, a fairly steep discount compared to the S&P 500's 25 multiple. While it's unlikely that we'll see that gap shrink significantly given the different compositions of the two products, it does suggest a certain downside protection that SCHD investors might enjoy in a market downturn.
The fund's current yield of 3.8% is more than 3 times that of the S&P 500. Its 0.06% expense ratio is among the cheapest being offered by other dividend ETFs.
If you're looking for a combination of dividend predictability and high yield in your portfolio, few ETFs have delivered in the way that the Schwab U.S. Dividend Equity ETF has.
