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ETF Specialist

High-Quality Dividends for a Slim Fee

Schwab US Dividend targets steady dividend-payers and is the least expensive dividend-oriented ETF available.

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 Schwab US Dividend Equity ETF (SCHD) is a passively managed exchange-traded fund that homes in on high-quality income-producing stocks. The fund's index is composed of large, liquid companies that have paid dividends in each of the past 10 years, and it requires constituents to earn high marks on four fundamental metrics: cash flow/debt, return on equity, dividend yield, and dividend growth. The resulting portfolio is one of the highest-quality among all large-cap dividend-oriented ETFs. Also, it charges a 0.07% expense ratio, which makes it the least expensive dividend-oriented ETF available. This fund's high-quality portfolio and low cost make it a suitable core equity holding.

The fund can also be used in a more targeted fashion as a source of equity income. Relative to its large-cap dividend-oriented peers, this fund will likely generate an income stream that is more stable and that should grow with time. This is reflective of the methodology of its underlying benchmark, which specifically targets high-quality, steady dividend payers, and is not--as some of competing funds' benchmarks are--tuned to isolate constituents exclusively on the basis of high current and/or prospective payouts or yields.

Ben Johnson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.