Why SCHD Is Still The BEST Dividend ETF Ever
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In the world of dividend investing, no other ETF is quite as widely worshipped as SCHD, which recently announced its latest dividend increase—coming in at a whopping 12% year-over-year!
Source: @SCHDETF on Twitter
In the spirit of the holiday season, this news was a timely reminder of why SCHD is the gift that just keeps on giving.
It’s also why I still consider it the Holy Grail of Dividend ETFs—a title it has rightfully earned through its solid dividend yield and unmatched track record of dividend growth that always goes above and beyond.
Source: Seeking Alpha
To put things into perspective, we can compare SCHD’s dividend stats to some of its peers—like DGRO and VYM. Both are also solid ETF options, but neither can match SCHD’s overall dividend profile.
Not only do both of those have lower starting yields and dividend growth rates compared to SCHD, but they have also delivered lower total returns over the last 5 years.
With that in mind, I can’t think of a reason why you’d want to own either of those over SCHD. Maybe more diversification—since both DGRO and VYM have more holdings than SCHD—but is that a good enough reason?
Source: Seeking Alpha
SCHD’s performance in this period isn’t an anomaly either. As we’ll see in just a moment, SCHD has an even more extensive history of delivering outsized total returns.
In my opinion, that’s no surprise considering the fund’s objective and strategy, which is to: “Invest in stocks selected for fundamental strength relative to their peers…focused on the quality and sustainability of dividends.”
At the end of the day, the only companies that can continue to pay and grow their dividends are fundamentally strong ones. When you combine 100+ of these companies into one ETF, you get the kind of consistent performance and dividend growth that SCHD has dutifully delivered year after year.
Still on the topic of performance, SCHD was outperforming the S&P 500 for a long time as well, which is a notable achievement for any dividend ETF—or any security, for that matter.
However, with the S&P 500’s crazy surge this past year driven by the likes of the Magnificent Seven, it currently has an edge over SCHD in terms of total returns—but barely!
Source: Seeking Alpha
With that said, we all know that markets are cyclical, and what goes up tends to come down. After a frothy 2024, it wouldn’t surprise me to see some sort of pullback or correction in the near future.
And let me be clear, that isn’t a prediction—because I have no clue if or when that will happen. But if it did, SCHD looks well-positioned to hold its ground better than the S&P 500. At least, this is how we saw it play out in 2022.
While the S&P 500 dropped over 20% that year, SCHD experienced a much less drastic drawdown. And if history is any guide, SCHD could regain its lead in total returns if we encounter another 2022-like scenario in the future.
Source: Seeking Alpha
In regards to my portfolio, I dollar-cost average into both SCHD and the S&P 500 through VOO every week. I think these two make for a great combination—balancing solid total returns with some defensiveness and growing dividend income to match.
And I recently hit a major milestone with my SCHD position! I just crossed over 300 shares of the Holy Grail, which was the last remaining investing goal for the year that I wanted to cross off my list.
This officially makes SCHD the largest position in my portfolio with about $9,000 invested so far. Like I said, I’m adding to this ETF every single week, and if I keep on keeping on, I could probably reach 400 or even 500 shares by the end of 2025.
At the end of the day, SCHD’s combination of yield, growth, total returns, and overall resilience makes it the supreme leader of dividend ETFs, and one of the best all-around ETFs on the market.
Now with all of that said, I want to hear from you: Do you have any SCHD in your portfolio? Write to me here and let me know.
And if you want to learn about my BEST and WORST performing dividend stocks of 2024, I’m telling you all about them here.
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IN MY PORTFOLIO 📈
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ICYMI 🎥
How To Build A Dividend Stock Portfolio For BRAND NEW Investors
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CAREFULLY CURATED 🔍
📺 5 Questions With Joey Agree - Russ interviewing the CEO of Agree Realty (ADC). Needless to say, this is a must-watch for every dividend investor.
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SINCE YOU ASKED 💬
"I am currently struggling with the question: Should I only invest in ETFs? As some ETFs offer a great dividend yield and are extremely diversified, why would one invest in single stocks?"
- Catarina | Email Submission
It’s a tough question to answer, but it’s an important one to understand about yourself as an investor. In my opinion, it really comes down to how hands-on you want to be with your portfolio.
Does the idea of researching stocks (and learning how to do it) sound interesting to you? Do you like the thought of hand-picking where your money goes and custom-building a portfolio from the ground up? If so, investing in individual companies might be worth exploring.
That’s exactly why I choose to invest in individual stocks instead of going all-in on ETFs. For me, it’s more than just a way to build wealth—it’s also a hobby.
Sure, it takes more time than just throwing everything into SCHD or VOO and calling it a day, but I enjoy it. I find it fun and interesting, and I’ve learned so much in the process.
With that said, if you’d rather not deal with any of that, you’re probably better off sticking with ETFs. And honestly, that’s a great option.
ETFs are simple, well-diversified, and require way less time and effort. They allow you to build wealth with a set-it-and-forget-it approach, which might be exactly what you're looking for.
And the good news is you don’t have to choose one or the other. You can invest in both individual stocks and ETFs if you want.
A lot of investors make ETFs the foundation of their portfolio and then sprinkle in a few individual stocks on top to test the waters. It’s a great way to dip your toes into stock-picking without jumping in headfirst.
Have a question? Ask me here to see it featured in an upcoming newsletter.
LAST WORD 👋
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Click here to join the DRIP N' Sip Discord group. Like I said, it's totally free, and I look forward to seeing you in there!
