There's nothing better than collecting passive income. Getting money for doing nothing. Just sit back and watch the dividend income roll in. It can be reinvested in stocks or simply used to cover expenses. While money may not buy happiness, it does provide people with opportunities and options for the future.
Dividend income is valuable, but there can be risks. While some dividend stocks may seem incredibly safe today, will that still be the case in five, 10, or 20 years? A lot can change, as investors have seen numerous headwinds impact the market since the start of the decade: a global pandemic, sky-high inflation, supply chain disruptions, and multiple wars. The further out investors try to plan, the more uncertainty there inevitably is.
This is why, when it comes to dividends, the best option is to seek out a diversified exchange-traded fund (ETF) that can spread risk across many types of stocks. A great option for investors to consider here is the Schwab U.S. Dividend Equity ETF (SCHD +0.92%). Here's why this can be a solid buy-and-hold investment for the long haul.
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Why the Schwab fund shines
There are many dividend-focused ETFs out there, but some are still riskier than others. Some target high-yielding stocks whose payouts may not be sustainable. Others might invest in too many stocks, leading to sub-optimal payouts for the sake of broad diversification.
Picking the best dividend stocks, putting them into a fairly tight ETF where there's plenty of exposure to each one of them, while keeping fees low, isn't easy, but that's what the Schwab U.S. Dividend Equity ETF does, which is why it may be one of the best dividend investments available on the markets. With around 100 holdings, it's not overly diversified. It tracks an index focused on high-quality, sustainable dividends.
There's a broad mix of sectors within the ETF, including healthcare, energy, industrials, and consumer staples. Within its top holdings, investors gain exposure to many types of solid dividend stocks, including Coca-Cola, Chevron, and UnitedHealth Group. Meanwhile, the ETF charges an expense ratio of just 0.06%, while paying a dividend that yields 3.1% -- far better than the S&P 500 average of only 1%.
NYSEMKT: SCHD
Key Data Points
The ETF can be a great pillar to build a portfolio around
The Schwab ETF has an excellent mix of blue chip stocks, making it a solid investment to hang on to for the long haul, and that can be relied upon for dividend income for decades. It can be a solid pillar that can provide stability within a portfolio.
This year, the ETF has risen by 25%, and it's up around 35% in the past five years -- and that's without factoring in its dividend payments. And in the long run, it can still rise a whole lot higher.
