"Its strategy is to invest in high-quality companies with strong fundamentals and consistency in paying out dividends. It also shines for its ultra-low expense ratio of 0.06%. Moreover, it has generated a five-year return of over 35% and offers a high yield of around 4%. SCHD is heavily invested in defensive sectors like consumer staples and healthcare. Defensive sectors are recognized for generally remaining resilient even during market downturns."
"To generate a passive stream of income along with the potential for capital appreciation, many investors utilize dividend ETFs in their portfolios. But you may think that investing in dividend ETFs is as easy as dumping your money into the ETFs with the highest yields. The higher the yield, the better. Right? Not quite. Sometimes if it sounds too good to be true, it probably is. In fact, sometimes an unusually high yield could be a major red flag."
High dividend yields can be a red flag because struggling companies sometimes use high payouts to attract investors and some high-yield stocks carry high volatility. Investors should examine dividend ETFs for company fundamentals such as cash flow and revenue, plus factors like volatility, fees, and historical performance. Schwab U.S. Dividend Equity ETF (SCHD) targets high-quality, dividend-consistent companies, has a 0.06% expense ratio, a five-year return over 35%, an approximate 4% yield, heavy exposure to consumer staples and healthcare, and about $71.64 billion in net assets. A set of five ETFs offers alternatives to chasing extreme yield traps.
Read at 24/7 Wall St.
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