Dividend-focused investors should consider investing in the Schwab US Dividend Equity Fund (SCHD), iShares core Dividend Growth Funds (DGRO) and WisdomTree US Quality Dividend Growth Funds (DGRW).
These funds may not have the highest returns, but they’ve proven to be a good investment over time. The SCHD has a yield of 3.39%, and a compounded growth rate over the past five years (CAGR) is 12.8%.
As shown in the chart below, all three funds performed well over the last five years. SCHD has returned 83%, while DGRO (78%) and DGRW (98%) have risen. SPY, the SPDR S&P ETF that is more heavily weighted towards technology stocks has seen a 102% increase in value during this time period.
Schwab US Dividend ETF (SCHD).
Schwab US Dividend Equity ETF, with assets of over $60 billion under management is one of the most popular funds. The Dow Jones US Dividend 100 Index is a collection of dividend-paying companies. The fund looks not only at dividends but also companies with a higher relative strength than their peers.
Dow Jones considers four factors before adding companies to the fund. Dow Jones looks at four key factors when adding companies to the fund.
The SCHD ETF includes 100 companies that are spread out across the key sectors in US economics. The majority of these firms belong to the financial sector and include well-known names such as Blackrock, US Bancorp Fifth Third and T Rowe Price.
Health care is another big industry, and is seen by many as an all-weather business. Bristol Myers Squibb is one of the most notable names in healthcare. Others include Amgen, Abbvie and Pfizer.
SCHD owns shares in Fastenal and Ford. It also has stakes with EOG Resources and UPS. It has relatively little exposure to technology. The company has also no exposure to Real Estate Investment Trusts, Business Development Companies and Master Limited Partnerships.
Since its launch, the SCHD ETF’s performance has been good. The worst months were in 2018, when the ETF fell by 5.56 %, and 2022, when it declined by 3.23 %. The S&P 500 index and Nasdaq100 index fell by respectively 4.56% (in 2018) and 18.17% in 2022.
DGRO
Another popular, low-cost ETF to look at is the iShares Dividend Growth Index. The Morningstar US Dividend Growth Index is tracked by the ETF. This index looks at dividend-growing companies that have a proven track record.
The index takes into account several factors. A company’s payout ratio should be less than 75% and it must also have positive consensus estimates. Firms must also have an established record of increasing dividends over a period of at least five consecutive years.
These metrics show that the fund has 417 holdings, of which the majority are included in the S&P 500 Index. It is the composition of each fund that makes it different. The top companies are in financials, followed by healthcare, technology and industrials.
JPMorgan Chase, Johnson & Johnson Abbvie and ExxonMobil are some of its largest constituents. It does not, like SCHD invest in REITs which have higher dividend yields.
DGRO’s performance has been good since it was founded. In three out of nine years, it has seen negative returns. In 2022, it fell by 7.90%. And in 2018, it declined by 2.35%.
DGRW
Another top ETF that you should consider for dividends is WisdomTree US Quality Dividend Growth Fund. It tracks the WisdomTree US Quality Dividend Growth Index. The index includes over 300 companies with a history of growing and paying dividends. The index has a P/E ratio of 24, and a Price to Book Multiple of 6.6.
The DGRW ETF, unlike the others, has an extremely high weighting of technology stocks. This is why its P/E ratio is higher. The fund is dominated by tech stocks, which account for 27,8%, followed closely by Healthcare, Industrials, Financials and Consumer Staples.
Microsoft, Apple and AbbVie are among the top five companies of the fund. It is a little riskier because the top ten firms are weighted at 37%. It is also more expensive with a ratio of 0.28 %.
In the last decade, DGRW ETF also experienced three negative years. The worst years for the DGRW ETF were 2022 and 2018, when it fell by 6.34 % and 5.36 %, respectively.
Most analysts agree that benchmark ETFs, such as those that track the Nasdaq 100 or S&P 500 indexes, are the most effective way to increase returns. It has become increasingly clear over the years that it is very difficult to beat these indexes. But investing in DGRW and DGRO to complement the benchmark indices seems like a great idea.
This article Retire with dividends – The Case for SCHD ETFs, DGRO and DGRW appeared first on The Invezz
This site is for entertainment only. Click here to read more
