Schwab U.S. Dividend Equity ETF (SCHD) – A Simple Way to Build Decades of Passive Income
If your goal is steady, long-term passive income without constantly rotating in and out of stocks, the Schwab U.S. Dividend Equity ETF deserves serious consideration. SCHD trades around $31 and offers a dividend yield of roughly 3.5%, far above the S&P 500’s current yield of about 1.1%. That income gap alone makes it attractive for investors focused on cash flow.
The fund tracks the Dow Jones U.S. Dividend 100 Index and holds roughly 100 companies with at least 10 consecutive years of dividend payments. This isn’t a high-yield-for-the-sake-of-yield approach. The index screens for quality, which helps explain why long-term performance has remained competitive with broader market benchmarks. Over the past five years, SCHD has delivered an average annual return of 10.91%. Over 10 years, that figure rises to 13.55%, and since its 2011 inception, it has averaged 12.30% annually over 15 years.
For comparison, a broad S&P 500 ETF returned 13.82% over five years and 16.09% over 10 years. SCHD has slightly trailed in total return, but it has done so while delivering substantially more income along the way. Historically, dividend growers have outperformed non-payers over long stretches. From 1973 through 2024, dividend growers and initiators generated average annual returns of 10.24%, compared with just 4.31% for non-payers. That is a meaningful difference over decades.
The holdings are also diversified beyond tech, which makes the fund less dependent on one sector. Only about 10% of assets are in technology stocks. Energy accounts for roughly 20%, and consumer defensive names make up about 19%. Top positions include Lockheed Martin, Bristol-Myers Squibb, Texas Instruments, Chevron, Merck, ConocoPhillips, PepsiCo, Verizon, Altria, and Coca-Cola. These are established, cash-generating businesses with long operating histories.
Cost matters in a long-term strategy, and SCHD keeps fees low. The expense ratio is just 0.06%, meaning an investor pays $0.60 annually for every $1,000 invested. That is difficult to beat for a diversified, income-focused portfolio.
For investors who want dependable dividends, competitive long-term growth, and a simple structure that does not require constant oversight, SCHD offers a straightforward way to build wealth over decades while collecting meaningful income along the way.
