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Investing in exchange-traded funds or ETFs allows investors to build a diversified portfolio and lower overall risk. An ETF typically offers you exposure across asset classes, sectors, industries, and geographies. Moreover, as it holds a basket of stocks, you can gain access to quality companies at a very low cost.
There are several ETFs that have gained popularity among long-term investors. One such fund is the Schwab U.S. Dividend Equity ETF (AMEX: SCHD) which also offers you a dividend yield of 3.44%. Let’s see if you need to buy the SCHD ETF for its tasty dividend yield right now.
What type of ETF is SCHD?
The SCHD aims to track the total returns of the Dow Jones U.S. Dividend 100 Index before fees and expenses. It is a low-cost fund that offers potential tax efficiency. The Fund may serve as the core component of your portfolio or complement your existing portfolios.
The SCHD tracks an index that is focused on the quality and sustainability of dividends while investing in fundamentally strong stocks across various sectors.
With an average daily trading volume of three million, the SCHD has close to $49 billion in assets under management (AUM, making it one of the most popular ETFs for U.S. investors.
The SCHD ETF has returned:
- 5.4% in the last 12 months
- 15.4% in the last three years
- 11.67% in the last five years
- 11.67 in the last 10 years and
- 13.27% since its inception
We can see that the SCHD ETF has successfully outpaced inflation and created significant wealth for long-term investors.
What are the top holdings of the SCHD ETF?
The weighted average market cap of the fund is $148 billion, with a price-to-earnings ratio of 13.9x. Moreover, the SCHD ETF has a price-to-cash flow multiple of 9x, a price-to-book ratio of 3.5x, and a return on equity of 38%.
The top five holdings of the ETF account for 21.5% of the fund. These include blue-chip companies such as:
Amgen stock
Valued at $137 billion by market cap, Amgen (NASDAQ: AMGN) accounts for 4.47% of the SCHD ETF and offers a yield of 3.3%. A pioneer of the biotech industry, Amgen is among the largest healthcare companies globally and offers a dozen products focused on cancer, cardiology, inflammation, and neurology.
Cisco stock
The second-largest holding of the SCHD, Cisco (NASDAQ: CSCO), accounts for 4.33% of the ETF. The tech giant creates internet protocol-based routers and switches that help transfer vast amounts of data, voice, and video packets across networks.
Cisco stock offers a dividend yield of 2.8%.
AbbVie stock
Another research-based biopharma company, AbbVie (NYSE: ABBV), is engaged in the development and sale of pharma products. It accounts for 4.3% of the SCHD and offers a yield of 3.94%. AbbVie has a market cap of $260 billion and focuses on treating conditions ranging from autoimmune diseases to oncology and neurological disorders.
Broadcom stock
A semiconductor giant, Broadcom (NASDAQ: AVGO) yields 2.23%, and its dividend payouts have risen by more than 20% annually over the past decade. AVGO stock accounts for 4.25% of the ETF.
Home Depot stock
The fifth-largest SCHD holding is Home Depot (NYSE: HD) which accounts for 4.18% of the fund. It also offers a yield of 2.55%, and the stock has risen by 451% in the last 10 years after adjusting for dividends.
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