My number one financial goal is to increase my passive income to a level that covers my basic living expenses. I’ve found that investing in exchange-traded funds (ETFs) can help me make progress toward this goal.
one of my favorite ETF used to generate passive income yes Schwab U.S. Dividend Stocks ETF (NYSE: SCHD). I plan to continue to increase my holdings this February.
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this Schwab U.S. Dividend Stocks ETF have a very simple strategy. it tracks Dow Jones U.S. Dividend 100 Indexdesigned to measure the performance of 100 high-quality, high-yield dividend stocks. The fund screens companies based on several criteria: Dividend quality Characteristics, including yield and five-year dividend growth rate.
Over the past 12 months, the ETF’s average distribution yield was 3.8%. This is more than three times higher than before S&P 500 Indexof dividend yield (1.1%). To put that into perspective, every $100 I invest in this fund will generate about $3.80 in annual dividend income, while a similar investment in an S&P 500 index fund will only generate about $1.10 in annual dividend income.
The Charles Schwab U.S. Dividend Stocks ETF currently holds dividends that have grown by an average of more than 8% per year over the past five years. That’s much faster than the S&P 500’s dividend growth rate of 5%.
This ETF could provide me with an attractive, steadily growing stream of passive dividend income. Therefore, it should allow me to achieve my passive income goals faster. On top of that, earnings and dividend growth from the underlying companies steadily increase the ETF’s share price. This combination of income and growth has really stacked up over the years, with the Schwab U.S. Dividend Stocks ETF having delivered an average annualized total return of 12.3% since its inception in 2011.
This compelling combination of revenue and growth is why I plan to continue adding to this ETF in February.
Before you buy shares of the Schwab US Dividend Equity ETF, consider the following factors:
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