US Videos

A Low-Cost ETF for Income Seekers

Michael Rawson, CFA

Mike Rawson: Dividend-paying stocks have outperformed non-dividend-paying stocks over the long run. However, dividend-payers can be risky, particularly if they have a high dividend yield. They may be suspect to cut their dividend in the future. There are over 30 dividend-themed  ETFs available, and each has a unique approach to overcome this high-yield, high-risk problem.

One of our favorites is Schwab US Dividend Equity (SCHD). It screens for 100 high-yielding stocks that have strong balance sheets and strong cash flow. One of the things that we like most about it is its expense ratio. It charges only 7 basis points. That makes it the cheapest strategic beta fund in our universe. The fund is appropriate only as a satellite holding, so it should be paired with either more passive index funds or with some active managers. But overall, we think this is a good fund for investors looking for extra income.