As I do now and then, I'm here to recommend an exchange-traded fund (ETF) for your consideration. (Remember that ETFs are funds that trade like stocks.) Specifically, one that's focused on dividend-paying stocks. There are many such ETFs to choose from, but it's hard for me to recommend any other one than the Schwab U.S. Dividend Equity ETF (SCHD +0.40%).
Here's a look at why I like it so much.
Image source: Getty Images.
A glorious mix of income and growth
With dividend-focused ETFs, there's generally a trade-off between dividend income and growth. The highest-yielding ETFs tend to grow more slowly, and vice versa. The Schwab U.S. Dividend Equity ETF, though, is strong on both counts.
NYSEMKT: SCHD
Key Data Points
Its dividend yield is 3.25% (as of June 3); a look at its recent performance follows. I'm including the performance of the Vanguard S&P 500 ETF (VOO +0.55%), which recently yielded merely 1.1%, too, for comparison.
|
Fund |
3-Year Avg. Annual Return |
5-Year Avg. Annual Return |
10-Year Avg. Annual Return |
|---|---|---|---|
|
Schwab U.S. Dividend Equity ETF |
15.09% |
8.50% |
12.78% |
|
Vanguard S&P 500 ETF |
22.44% |
14.10% |
15.56% |
Data source: Morningstar.com, as of June 3, 2026.
You can see that the Schwab fund, up 19% year to date, delivers less growth than the S&P 500, but not that much less, especially when compared with many other dividend-focused ETFs. Also, it kicks out almost three times the dividend income as the S&P 500.
Meanwhile, its expense ratio -- i.e., its annual fee -- is also compelling, at a mere 0.06%. That means that for every $10,000 you have invested in the fund, you'll pay only $6.
The Schwab U.S. Dividend Equity ETF tracks the Dow Jones U.S. Dividend 100 Index, which encompasses 100 stocks with a track record of paying dividends for at least 10 years. The index also demands that its components appear financially healthy, gauging factors such as cash flow to total debt and return on equity. That requirement can help it perform well, as companies on shakier financial ground may have to reduce or even suspend their dividend payments should they run into trouble.
Also, healthy and growing dividend-paying stocks tend to increase their payouts over time, which will benefit shareholders.
What's in the Schwab U.S. Dividend Equity ETF?
Here are the top 10 holdings as of June 2, along with their weighting in the fund and their recent dividend yield:
|
Stock |
Weight in ETF |
Recent Yield |
|---|---|---|
|
Qualcomm |
6.21% |
1.47% |
|
Texas Instruments |
5.72% |
1.84% |
|
UnitedHealth Group |
5.14% |
2.46% |
|
Coca-Cola |
3.98% |
2.69% |
|
Chevron |
3.95% |
3.75% |
|
Merck |
3.78% |
2.96% |
|
Verizon Communications |
3.68% |
6.07% |
|
ConocoPhillips |
3.60% |
2.82% |
|
Procter & Gamble |
3.50% |
3.04% |
|
Amgen |
3.43% |
2.98% |
Data source: Morningstar.com, as of June 2, 2026.
These 10 holdings together make up about 43% of the ETF's value. About 18% of its assets are in consumer defensive stocks, 15% in energy stocks, and 18% in healthcare stocks. That kind of mix is appealing to me because I think there's a significant chance of a market pullback in the coming year or two. If that happens, those three sectors are likely to hold their value more than some others.
So give this dividend-focused ETF some consideration for your long-term stock portfolio, especially if you seek growth and income.
