Dividends can be a meaningful contributor to investor returns. And they can be much more reliable compared to unpredictable capital gains. That’s probably why many market participants focus their time and effort on income-generating strategies.
If this is your approach to the stock market, there are some options to consider. And if you have $2,000 available to invest that isn’t needed for monthly bills or to pay down short-term debt, here’s one option that could just be the smartest dividend exchange-traded fund (ETF) to consider.
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A huge dividend with a low fee
Investors should take a closer look at the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD). It tracks the Dow Jones U.S. Dividend 100 index. In total, there are 100 different stocks in the portfolio.
Not just any company can make it into this ETF. Stocks are included based on fundamental factors related to debt and profits. They must also have paid a dividend for at least 10 consecutive years. Plus, only businesses with market capitalizations above $500 million can qualify for potential inclusion.
Among the stocks qualifying under that criteria, the list is further narrowed by ranking them using an equal-weighted composite score across four key financial metrics: 1. Cash flow to total debt ratio; 2. Return on equity; 3. Dividend yield; and 4. Five-year dividend growth rate. The top 100 form the index.
The Schwab U.S. Dividend Equity ETF’s trailing 12-month distribution yield is solid at 3.29%. The quarterly payout has climbed 143% over the past decade. This translates to a growing stream of income. And the expense ratio is low at just 0.06%.
The top holdings in this ETF come from established companies, with consistent earnings and strong industry positions. They have the financial backing to continue funding ongoing dividends.
The current market environment boosts this ETF’s value proposition
Performance is maybe the most important data point prospective investors care about. The Schwab U.S. Dividend Equity ETF has stood out in this regard. In the past 10 years, its total return was 229% (as of June 8). And so far in 2026, it has generated a total return of 19%. This is significantly better than the 8% total return of the S&P 500 index.
There is no shortage of reasons for investors to worry these days. Geopolitical turmoil, inflationary pressures, the threat of disruption from artificial intelligence, and high consumer debt can cause uneasiness. Based on recent performance, the clear takeaway is that during times of excess market uncertainty and volatility, the Schwab U.S. Dividend Equity ETF shines.
