The stock market has experienced a challenging start to the year, with the S&P 500 index, which tracks 500 of America’s largest companies, down 5.4% as of March 24. This downturn indicates that many individual stocks are also seeing declines. However, lower stock prices can be advantageous for investors in dividend-paying stocks, as this can lead to an increased dividend yield.
For those looking to build a long-term investment portfolio, whether with $10,000 or $100,000, one potential option to consider is the Schwab U.S. Dividend Equity ETF (SCHD). This exchange-traded fund (ETF) is designed to offer a balance of price appreciation and dividend income.
Currently, the S&P 500 exhibits a modest dividend yield of just 1.1%. In contrast, the Schwab U.S. Dividend Equity ETF boasts a much more attractive yield of approximately 3.3%, which is three times higher. The ETF has demonstrated impressive performance metrics over different time frames, averaging annual gains of 12.90% over the past three years, 8.92% over the last five years, and 12.36% over the past decade.
The ETF focuses on a diverse selection of about 100 financially healthy companies with reliable dividend distributions. Among its top ten holdings, the following stocks are noteworthy based on their weight in the ETF and recent dividend yields:
1. Chevron: 4.58% weight, 5.31% yield
2. ConocoPhillips: 4.20% weight, 2.60% yield
3. Verizon Communications: 4.10% weight, 5.56% yield
4. Merck: 3.99% weight, 2.92% yield
5. Texas Instruments: 3.96% weight, 2.92% yield
6. Coca-Cola: 3.94% weight, 2.76% yield
7. UnitedHealth Group: 3.84% weight, 3.25% yield
8. Abbott Laboratories: 3.79% weight, 2.42% yield
9. PepsiCo: 3.79% weight, 3.78% yield
10. Amgen: 3.79% weight, 2.89% yield
This ETF presents a relatively effortless way for investors to gain exposure to a wide array of dividend-paying companies, allowing for passive income generation that is likely to increase over time. Even if the stock market experiences stagnation or further downturns, many components of this fund are expected to continue paying dividends, making it a resilient choice for uncertain market conditions. This combination of growth potential and income makes the Schwab U.S. Dividend Equity ETF a compelling option for long-term investors looking to navigate the current market landscape.
