Many of the same rules used to build strong U.S. dividend portfolios can also apply to international stocks. And the Schwab International Dividend Equity ETF (SCHY +0.43%) is one of the fastest-growing and most cost-effective ways to do just that.
In this article, we'll walk through what this top dividend exchange-traded fund (ETF) holds, how it works, how to buy it, and whether it might deserve a place in your portfolio as a beginner ETF investor.
Exchange-Traded Fund (ETF)
What is the Schwab International Dividend Equity ETF (SCHY)?
This Schwab ETF is a passively managed ETF designed to replicate the holdings of the Dow Jones International Dividend 100 index. Its portfolio comprises stocks in the Dow Jones Global ex-U.S. Large-Cap and Mid-Cap indexes, excluding real estate investment trusts (REITs).
To be included, companies must have paid dividends for at least 10 consecutive years and meet minimum liquidity and free-float market cap requirements. The core of this ETF's strategy is a composite screen using four equally weighted fundamentals: free cash flow to total debt, return on equity, indicated dividend yield, and five-year dividend growth rate.
This narrows the universe to the top 400 dividend payers. From there, the index removes stocks with above-median volatility and ranks the remaining names based on their composite score. The final portfolio includes up to 100 stocks weighted by market cap, with a 4% cap per stock, 15% sector cap, and a 15% limit on emerging markets exposure.
Should I invest in the Schwab International Dividend Equity ETF (SCHY)?
There's no guarantee that U.S. stocks, even dividend payers, will outperform forever. Limiting your portfolio to domestic holdings means potentially missing out on global leaders in sectors such as consumer goods, healthcare, and industrials.
The Schwab International Dividend Equity ETF gives you access to some of those names, with a yield that surpasses most U.S.-based dividend ETFs. That's because international companies, on average, tend to distribute a higher share of earnings back to shareholders.
On top of that, the stocks in this ETF are generally cheaper by several valuation measures. These include price-to-earnings, price-to-sales, and price-to-book, making them solid long-term buy-and-hold picks.
Does the Schwab International Dividend Equity ETF (SCHY) pay a dividend?
Yes, this ETF currently pays a 4.33% 30-day Securities and Exchange Commission (SEC) yield, which is higher than most comparable U.S. dividend ETFs. The ETF's payout frequency is quarterly.
What is the expense ratio for the Schwab International Dividend Equity ETF (SCHY)?
The ETF has an expense ratio of 0.08%, meaning you'll pay just $8 annually for every $10,000 invested. This fee isn't charged upfront. It's deducted automatically from the fund's returns, so you won't see it leave your account directly, but it slightly reduces overall performance.
Expense Ratio
The Schwab International Dividend Equity ETF's expense ratio used to be 0.14%, so the recent cut makes it even more competitive. This is especially true in the international dividend ETF space, where fees often run higher. For cost-conscious investors, it's one of the most affordable options in its category.
Historical performance of the Schwab International Dividend Equity ETF (SCHY)
Metric | YTD | 1 Year | 3 Years |
|---|---|---|---|
Net asset value | 14.68% | 16.22% | 6.88% |
Market price | 14.69% | 16.61% | 7.05% |
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The bottom line on the Schwab International Dividend Equity ETF (SCHY)
This Schwab ETF offers a simple, low-cost way to add global diversification and dividend income to your portfolio. By focusing on companies with strong fundamentals and long-term dividend track records, it provides exposure to quality international names often overlooked by U.S.-centric investors.
With its attractive yield, rules-based screening process, and low expense ratio, this international dividend ETF stands out as a strong option for those looking to balance income, value, and quality in one fund.
