Want Decades of Passive Income? Buy This ETF and Hold It Forever

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What are some methods for earning income without actively working for it? In the spirit of William Shakespeare, allow me to enumerate the possibilities.

When considering passive income, some people might think of rental properties. Others may opt for affiliate marketing or producing online videos that draw advertisers, which is a growing trend.

I believe I have another simpler option for you to consider. Are you interested in long-term passive income? Then, consider purchasing the Schwab U.S. Dividend Equity ETF (SCHD) and holding onto it indefinitely.

A passive income machine

This Schwab U.S. Dividend ETF aims to mirror the returns of the Dow Jones U.S. Dividend 100 Index. At present, it holds a total of 103 stocks, with significant investments in companies like Texas Instruments (TXN), Chevron (CVX), ConocoPhillips (COP), Merck (MRK), and Cisco Systems (CSCO).

Individuals looking for passive income might find themselves drawn to the Schwab U.S. Dividend Equity ETF due to its strong history of expanding its payout. This fund has shown significant growth since it started on October 20, 2011, with its distribution rising by a notable 541%. This equates to approximately a 14% compound annual growth rate.

For the past year, this Exchange-Traded Fund (ETF) has provided a distribution yield of approximately 3.87%. However, its 30-day SEC yield is slightly less at 3.85%. If you were to invest $100,000 at the lower yield, you’d earn around $3,850 in annual income without needing to put in much effort – just buy the Schwab U.S. Dividend Equity ETF.

More to like about this ETF

Investors focusing on income might find the Schwab U.S. Dividend Equity ETF a relatively safe choice, despite the fact that it follows an index centered around high-yield dividend stocks, which can carry increased risk. The reason for this is that the managers of the index carefully choose stocks from companies with proven track records of regular dividend payments and financial stability compared to their peers in the market.

A lower valuation ratio makes this ETF’s risk level more minimal. The typical stock in its collection is sold for under 16 times the previous year’s earnings. While that’s not incredibly cheap, it’s significantly less than the S&P 500’s price-to-earnings ratio of close to 30.

Speaking informally, you could say: “The Schwab U.S. Dividend Equity ETF has been quite impressive in the long run. Since its launch, it has consistently delivered an annual return of about 12.3%, on average. Over the past five years, this fund’s average annual return even climbed up to 12.9%.”

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This high-quality dividend ETF comes at an affordable price, with an annual fee of just 0.06%. Its cost-effective structure is a testament to its passive investment strategy.

In summary, the Schwab U.S. Dividend Equity ETF boasts significant liquidity, with its total net assets exceeding $70.2 billion and an average daily trading volume of approximately 16 million shares. This implies that you can effortlessly buy, hold, or sell this ETF according to your investment strategy.

The best dividend ETF of all?

Is the Schwab U.S. Dividend Equity ETF currently one of the top performing dividend exchange-traded funds (ETFs) available? I believe there are compelling reasons to support this claim.

Certainly, you might come across dividend ETFs that provide a higher return on investment. For instance, the SPDR Portfolio S&P 500 High Dividend ETF, represented by SPYD, offers a distribution yield close to 4.5%. Similarly, the JPMorgan Nasdaq Premium Equity Income ETF (JEPQ) boasts an exceptionally high yield of approximately 11.3%.

Nevertheless, it’s crucial to remember that a high yield isn’t the only aspect to focus on. Reliability of distributions, potential for distribution growth, and past performance in terms of overall returns are equally significant factors worth considering. The Schwab U.S. Dividend Equity ETF stands out in all these key areas.

I’m not saying that the Schwab U.S. Dividend Equity ETF is undeniably the finest dividend ETF available; however, in my view, it ranks quite highly among them.

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2025-07-20 05:02