I was hoping to get some opinions on Schwab's dividend fund SCHD. It yields around 3.5% with very low fees. It's made up of many very large, stable companies which pay consistent dividends year after year. It seems like a win win with guaranteed dividend income and good potential long term growth. Thoughts?
Thoughts on Schwab's SCHD ETF
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gcgang
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How do you think this is "guaranteed" income? Granted, your income will PROBABLY grow over time. And historically value has appreciated. But I'd stay away from the "g" word.
brucethebroker
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Interesting post. Thanks OP. I want to hear the opinions, also.
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i consider dividends something to be avoided. They create unnecessary taxes for me. I prefer to sell shares instead to get money to pay expenses.
It appears that SCHD has underperformed a total US stock market index fund, too, so why even bother with something that gives you less money and costs you more in taxes?
It appears that SCHD has underperformed a total US stock market index fund, too, so why even bother with something that gives you less money and costs you more in taxes?
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NW-Bound
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Using Morningstar, I see that when dividends are reinvested, SCHD runs neck-to-neck with VTSMX (Vanguard Total Index), VFINX (Vanguard S&P), VYM (Vanguard High Yield) for the last 5 years.
A $10K invested on 4/28/2012 becomes, on 4/27/2017, $18,715 for VTSMX, $18,807 for VFINX, $18,596 for SCHD, and $18,721 for VYM. Looks like there is no difference whether you invest in all large cap, or just large cap value stocks. The total return is the same, whether it is more in capital gain or in dividend.
To see over a longer period, I look at 10-year past performance. SCHD's inception is in 2011, so it does not go back that far. But what I found surprising is there is still little difference between dividend stocks (VYM) and the total market, even at the bottom of the crash in 2009.
A $10K invested on 4/28/2007 becomes $4,754 for VTSMX, $4,773 for VFINX, and $4,507 for VYM, at the bottom of the Great Recession on March 2009.
So, the OP can certainly invest in SCHD. It is rated 4-star by Morningstar. The expense of 0.07% is pretty darn good. One can do worse that that. It does not provide the guarantee that the OP was hoping for. Looks like nothing will either (and still provides some growth prospect).
A $10K invested on 4/28/2012 becomes, on 4/27/2017, $18,715 for VTSMX, $18,807 for VFINX, $18,596 for SCHD, and $18,721 for VYM. Looks like there is no difference whether you invest in all large cap, or just large cap value stocks. The total return is the same, whether it is more in capital gain or in dividend.
To see over a longer period, I look at 10-year past performance. SCHD's inception is in 2011, so it does not go back that far. But what I found surprising is there is still little difference between dividend stocks (VYM) and the total market, even at the bottom of the crash in 2009.
A $10K invested on 4/28/2007 becomes $4,754 for VTSMX, $4,773 for VFINX, and $4,507 for VYM, at the bottom of the Great Recession on March 2009.
So, the OP can certainly invest in SCHD. It is rated 4-star by Morningstar. The expense of 0.07% is pretty darn good. One can do worse that that. It does not provide the guarantee that the OP was hoping for. Looks like nothing will either (and still provides some growth prospect).
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target2019
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There are other topics which cover this.
I hold SCHD in a Schwab brokerage. The dividends are largely qualified, but you'd have to check their site about it. That would affect tax you pay, depending on your bracket.
When dividends are not taken, and reinvested, the ETF grows more. If you take the dividends, it grows slower.
Top 10 holdings:
HOME DEPOT INC ..
MICROSOFT CORP ..
INTEL CORP COMM..
COCA COLA CO/TH..
EXXON MOBIL COR..
PEPSICO INC COM..
JOHNSON + JOHNS..
PROCTER + GAMBL..
PFIZER INC COMM..
VERIZON COMMUNI.
As mentioned, even these giant companies can experience a 50% decline, or more.
I hold SCHD in a Schwab brokerage. The dividends are largely qualified, but you'd have to check their site about it. That would affect tax you pay, depending on your bracket.
When dividends are not taken, and reinvested, the ETF grows more. If you take the dividends, it grows slower.
Top 10 holdings:
HOME DEPOT INC ..
MICROSOFT CORP ..
INTEL CORP COMM..
COCA COLA CO/TH..
EXXON MOBIL COR..
PEPSICO INC COM..
JOHNSON + JOHNS..
PROCTER + GAMBL..
PFIZER INC COMM..
VERIZON COMMUNI.
As mentioned, even these giant companies can experience a 50% decline, or more.
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