In the intricate landscape of exchange-traded funds (ETFs) within the United States, a noteworthy pattern emerges: the dominance of three financial giants—State Street Global Advisors with its SPDR series, BlackRock with iShares, and VanguardWhile these institutions lay claim to a significant portion of the market, there is a compelling outlier in the form of the Schwab US Dividend Equity ETF (SCHD). Launched on October 20, 2011, this particular ETF has steadily carved out its niche, representing the largest ETF issued by an entity other than the classic big three, with an impressive asset base being built over the years.
Tracking the Dow Jones U.SDividend 100 Index, SCHD encompasses 100 stocks that have a solid history of paying dividendsBy June 17, 2022, its assets had ballooned to approximately $33.4 billion, positioning it as the 37th largest ETF in the U.SMarketThe real jewel in SCHD’s crown is its remarkable performance; between its inception and 2021, it reported an annualized return of nearly 14%. In contrast, two other renowned funds—the Vanguard Dividend Appreciation ETF (VIG) and ProShares S&P 500 Dividend Aristocrats ETF (NOBL)—achieved returns of 10% and 12%, respectively, since their launches in 2006 and 2013. VIG and NOBL track indices that include over 200 and 65 stocks, respectively, which also highlights the concentrated portfolio strategy of the Schwab ETF.
The growth of SCHD is remarkable; by early December 2022, its assets soared to $44.964 billion, marking a growth of nearly 35% since mid-yearThis surge is evident when examining its price movementsOn June 17, 2022, SCHD closed at $69 per share, but by early December, it consistently traded above $75, peaking close to $80. This increase of up to 16% reflects not only investor confidence but also an affirmation of its underlying value
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Price fluctuations in financial markets often correlate with broader economic sentiments, and SCHD's steady ascent can be partly interpreted as a reaction to its perceived value as a dividend-paying vehicle.
Moreover, SCHD has displayed robust performance comparativelyFor instance, its returns over the last month, two months, three months, and the past 52 weeks were 5.69%, 11.13%, 7.80%, and 1.05%, all indicating positive growthLooking longer term, SCHD outperformed peers with cumulative returns of 36.76% and 53.98% over three and five years, respectivelyThese statistics portray not just a strong dividend growth profile but also a commitment to capital appreciation.
Delving into its sector allocation, SCHD mirrors its tracking indexAs of early December 2022, its highest sector allocations included financial services (20.34%), industrials (16.68%), technology (16.25%), consumer staples (13.59%), healthcare (13.05%), consumer discretionary (7.58%), and energy (5.39%). This diversification across sectors indicates a comprehensive approach geared towards dividend sustainability and growth, with a balanced exposure across various sectors of the economy.
Dividends and share buybacks are often cited as pivotal forces driving the long bull market in U.S. equities over the past decadeInvesting in dividend stocks might represent a strategy for generating passive income while constructing a resilient portfolioHowever, picking the right stocks presents a notable challenge for individual investors, many of whom may not possess the acumen necessary for analyzing financial statements or executing exhaustive research on publicly traded companiesOn the other hand, a dividend ETF like SCHD simplifies the investment processInvestors can maintain their commitment by contributing periodically, benefiting from both capital appreciation and quarterly or annual dividend distributions.
The influx of investor funds into dividend ETFs has precipitated returns that outperform the broader market averages
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