Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some dividend-paying stocks to your portfolio but don't want to spend the time deciding which ones, the Schwab U.S. Dividend Equity ETF (SCHD 0.69%) 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 super-low 0.07%, recently reduced from an already low 0.17%. The ETF recently yielded 3% as well.
This ETF isn't old enough to have a track record sufficient for assessment. 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?
More than a handful of dividend-paying companies had strong performances over the past year. Abbott Labs (ABT 0.49%) surged 41%, for example, and recently yielded 2.9%. It will soon be splitting its pharmaceutical business from its nutrition and devices businesses, which some expect will unlock more value for investors. In the meantime, though, the company got good news when an FDA advisory panel supported approving Abbott's $8 billion drug Humira for an additional condition, colitis, paving the way for more revenue. Meanwhile, Abbott has been profiting from sizable business in fast-growing emerging markets. A concern with big pharmaceutical companies, though, is the upcoming patent expiration on their blockbuster drugs. Abbott seems to be in better shape than its peers on that count, though.
Honeywell (HON 0.30%) gained 40% and recently yielded 2.5%. Cutbacks in government and military spending may likely hurt the company, but the commercial sphere looks healthy, with a hefty backlog of orders for planes. The company is well-diversified beyond aviation, too -- for example, recently introducing a laminate film that can make solar-energy panels more efficient and developing technologies to improve liquefied-natural-gas production.
Boeing (BA -0.76%), up 16% and yielding about 2.5%, has taken to the skies after finally bringing its Dreamliner 787 to market and racking up new orders recently. It's experiencing labor unrest, though, which could slow down its production. There have also been controversies over government subsidies to the company and the threat of a bigger competitor via a merger.
Emerson Electric (EMR 1.05%), up 15% and yielding 3.3%, has cut back its projections for the year as it fights sluggishness in Europe and the effects of a strengthening dollar. It noted that orders were flat to down 5% over the three months ended in July, partly due to its exposure to Europe. Operating profit grew, though, and the company was able to convert backlog tied to flooding in Thailand into higher-margin sales. It's also expanding its scope, serving marine vessels, for example, via an acquisition from Johnson Controls.
The big picture
Demand for these companies' offerings isn't going away anytime soon. 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.
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