5 Reasons the Schwab U.S. Dividend Equity ETF Is a Long-Term Buy for 2030 and Beyond
Let's say you have some money in your pocket you want to invest, but you're not sure where to put it. Perhaps you're extra worried due to recent market volatility.
I'm going to offer a solid investment suggestion, but first remember that any money you might need within five (or, to be more conservative, even 10) years should not be in stocks. Put those dollars in less volatile places, such as savings accounts, bonds, money market accounts, certificates of deposit (CDs), and so on.
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For your long-term dollars, here's my suggestion: the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD). (Remember that an exchange-traded fund (ETF) is a fund that trades like a stock.) Here are five reasons why you might consider it for your portfolio.
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1. Receive dividend income in good times and bad
One of the best things about dividend-paying stocks is that as long as they're tied to healthy and growing companies, they'll keep on kicking out income to you no matter what the economy and the stock market are doing. For example, as long as people keep buying soap and electricity, which they will probably do in any kind of economic environment, soap and electric companies will keep collecting revenue and paying dividends.
So your stock holdings may be in a slump for a while, but you could still be receiving dividend income -- and potentially a lot of it! If you have, say, a $400,000 portfolio with an average overall dividend yield of 3%, that's $12,000 in annual income -- about $1,000 per month, on average.
2. Dividends tend to be increased
Better still, dividends from healthy and growing companies tend to be increased over time. Ideally, they'll even keep up with inflation. Between likely stock price appreciation over time, dividend income, and dividend increases, dividend-paying stocks are rather powerful investments. Check out the table, adapted from a Hartford Funds report:
|
Dividend-Paying Status |
Average Annual Total Return, 1973-2023 |
|---|---|
|
Dividend payers |
9.17% |
|
Dividend non-payers |
4.27% |
|
Equal-weighted S&P 500 index |
7.72% |
Data source: Ned Davis Research and Hartford Funds.
3. This ETF has low fees
It's always important to assess fees when you're thinking of investing in a mutual fund or ETF, and the Schwab US Dividend Equity ETF has very low fees. Its expense ratio (annual fee) is just 0.06%. So on an investment of $10,000, you'll pay just $6 per year. That's pretty good!
4. The portfolio is promising
Another cool thing about this Schwab dividend ETF -- and any index fund -- is that it saves you from having to study and pick stocks on your own. The funds just buy whatever's in the index they track. In this case, you'll end up with a lot of stocks that have been chosen because they pay dividends and also seem to be relatively financially strong.
The ETF typically holds about 100 stocks. Here are its recent top holdings:
|
Stock |
Percent of ETF |
|---|---|
|
AbbVie |
5.04% |
|
Amgen |
4.77% |
|
Coca-Cola |
4.75% |
|
Bristol-Myers Squibb |
4.38% |
|
Pfizer |
4.29% |
|
Verizon Communications |
4.25% |
|
Cisco Systems |
4.23% |
|
Chevron |
4.05% |
|
PepsiCo |
3.96% |
|
Altria |
3.83% |
Data source: Morningstar.com, as of March 13, 2025.
You probably see some solid companies that you'd like to own a piece of in that table. Buying this ETF means you'll be a part owner of each -- plus about 90 others.
5. You can dollar-cost average into it
Finally, there's this benefit. It's a great fund to dollar-cost average into over time. And that can be a savvy move if the market is swooning or you think it will swoon. Dollar-cost averaging means buying the same dollar amount of shares regularly.
You can just buy into the ETF over time in a less regimented fashion, too, simply buying more shares whenever you have funds to invest. When the market is down and/or the ETF is down, you'll get more shares for your money -- and vice versa. Here, by the way, is the ETF's track record:
|
ETF |
Five-Year Avg. Annual Return |
10-Year Avg. Annual Return |
|---|---|---|
|
Vanguard S&P 500 ETF |
17.00% |
12.53% |
|
Schwab US Dividend Equity ETF |
17.67% |
11.17% |
Data source: Morningstar.com, as of March 13, 2025.
Whether you invest in this Schwab ETF or any other solid dividend-paying ETFs, you may be able to amass a significant nest egg.
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Selena Maranjian has positions in AbbVie, Altria Group, Amgen, Bristol Myers Squibb, Pfizer, Schwab U.S. Dividend Equity ETF, and Verizon Communications. The Motley Fool has positions in and recommends AbbVie, Bristol Myers Squibb, Chevron, Cisco Systems, Pfizer, and Vanguard S&P 500 ETF. The Motley Fool recommends Amgen and Verizon Communications. The Motley Fool has a disclosure policy.
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