The Schwab U.S. Dividend Equity ETF Has Delivered a 12.9% Annualized Return. These 2 Top Holdings Showcase the Power of its Investment Strategy.

1 hour ago 1

Matt DiLallo, The Motley Fool

Sat, February 28, 2026 astatine 10:32 AM CST 5 min read

Many investors deliberation that dividend stocks are boring investments. While they mightiness not present the thrills of immoderate maturation stocks, their returns are thing but boring. Over the past 50 years, dividend stocks person outperformed non-dividend payers by much than two-to-one.

The Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) has experienced the powerfulness of dividend investing firsthand. The exchange-traded money has delivered a 12.9% annualized instrumentality since its enactment successful October 2011. Here's a look astatine wherefore its dividend investment strategy has been truthful successful.

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The Schwab U.S. Dividend Equity ETF has a precise simple strategy. It tracks the Dow Jones U.S. Dividend 100 Index, which measures the show of 100 apical high-yield dividend stocks. The scale screens companies based connected 4 dividend prime characteristics, including dividend output and five-year dividend maturation rate. That absorption connected dividend maturation is worthy noting.

The information connected dividend stocks shows a wide trend. Companies that steadily turn their dividends present the champion returns implicit the agelong term:

Dividend policy

Average yearly full returns

Dividend growers & initiators	10.2%
Dividend payers	9.2%
No alteration successful dividend policy	6.8%
Dividend cutters & eliminators	-0.9%
Dividend non-payers	4.3%
Equal-weighted S&P 500 index	7.7%

Data source: Ned Davis Research and Hartford Funds. (Note: Data for S&P 500 companies from 1973 to 2024).

A big origin driving the higher returns of dividend growers is their operation of income and net growth. The expanding dividend income provides investors with a steadily rising basal instrumentality portion their increasing net thrust stock terms appreciation.

The Schwab U.S. Dividend Equity ETF holds 100 companies that person higher dividend yields and are increasing their payouts astatine above-average rates. For example, successful March, erstwhile the money completed its past yearly reconstitution, its 100 holdings had an mean dividend output of 3.8% and had been increasing their dividends astatine an 8.4% annualized rate. For comparison, the S&P 500 presently yields 1.2% portion delivering 5% compound yearly dividend maturation implicit the past 5 years. SCHD's higher output and dividend maturation complaint should thrust higher full returns implicit the agelong term.

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