Buying dividend stocks is a great way to generate passive income. However, with so many companies paying dividends, it can be difficult to know where to start.
He Schwab US Dividend Stock ETF (NYSEMKT:SCHD) makes it easy. He exchange-traded fund (ETF) allows you to invest in 100 of the best dividend stocks through an easy-to-purchase package. And charges an ultra-low expense ratio, allowing investors keep more of the dividend income these stocks produce without giving back too much in fees.
A Who's Who of Dividend Stocks
He Schwab US Dividend Stock ETF aims to track the Dow Jones US Dividend 100 Index. That index measures the performance of top-yielding dividend stocks with a track record of consistency and strong financial metrics compared to their peers. These features allow companies to steadily increase your above-average payments.
This is clear when looking at some of the fund's top holdings. house deposit (NYSE: HD) It currently sits at the top of the list with an allocation of 4.3%. The home improvement retail giant has a dividend yield of over 2% at Friday's prices, comfortably ahead of S&P 500 (less than 1.5%). Home Depot has an excellent record of paying dividends. Increases its payout for 15 consecutive yearsincluding 7.7% in February. The company backs its payment with a solid financial profile. It generated nearly $11 billion in net cash from operating activities in the first half of this year, easily covering its dividend outlay of about $4.5 billion. With its cash flow, balance sheet, and strong long-term fundamentals, Home Depot should have no problem continuing to pay dividends.
Verizon (NYSE: VZ) It is the fund's second largest holding, with 4.25% of its assets. The telecommunications titan currently offers a dividend yield of over 6%. It recently delivered its 18th consecutive annual dividend increase, the longest current streak in the U.S. telecommunications sector. Verizon produces a lot of cash ($16.6 billion of cash flow from operations in the first half of this year), which covered its capital expenditures ($8.1 billion) and dividend payments ($5.6 billion) with plenty of space. Verizon is using its excess free cash to strengthen its already strong balance sheet. which giving you the financial strength to buy Border communications in a $20 billion cash deal to fuel future growth.
High performance for a low price
Home Depot and Verizon are two of the 100 dividend stocks the fund owns. Most of its holdings offer high dividend yields. Therefore, the fund itself has a high yield. Over the past year, the fund's return was 3.3% based on its distribution payments.
Those payments ebb and flow each quarter based on the dividend payments received by the fund. However, they have been trending upwards over the years:
Driving that growth is the fund's focus on holding stocks that regularly increase their dividends. Many of its top holdings have generated a decade or more of annual dividend increases. Given the fund's preference for companies with leading financial profiles, these companies should be able to continue increasing their payouts.
Fund investors get that growing stream of income by a very low price. The ETF has 0.06% expense ratio. For comparison, some other top Dividend ETFs have expense ratios between 0.28% and 0.35%. Put another way, a $1,000 investment in the Schwab US Dividend Equity ETF would cost just $0.60 each year in fees, while higher-cost funds would incur between $2.80 and $3.50 in annual management fees. for every $1,000 invested.
A great way to collect dividend income
Investing in dividend stocks is a great way to generate passive income. You can hand-select a portfolio of top dividend stocks or go the easy way and get 100 of them in a single fund through the Schwab US Dividend Equity ETF. The ETF charges a low rate, allowing investors to keep more of the high-yield dividend income their holdings generate. These features make it the best option for those looking collect dividend income.
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Matt DiLallo He has positions at Home Depot and Verizon Communications. The Motley Fool has posts and recommends Home Depot. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.
Do you want to earn passive income? This high-yield ETF gives you 100 top dividend stocks for one low price. was originally published by The Motley Fool