Want Decades of Passive Income? Buy This Index Fund and Hold It Forever.
- Finance
ThePostMaster- 0
- 19 minutes read
Want to know what my favorite dividend-focused exchange-traded fund (ETF) is? Well, it’s the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD). It’s worth considering for your portfolio because dividends can be powerful wealth builders — especially when you plow them into more shares of stock.
Here’s a look at the power of dividends and why you might consider this ETF. (Remember, an ETF is a fund that trades like a stock.)
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To see why I’m a fan of dividend-paying stocks, check out the table:
Dividend-Paying Status | Average Annual Total Return, 1973-2024 |
|---|---|
Dividend growers and initiators | 10.24% |
Dividend payers | 9.20% |
No change in dividend policy | 6.75% |
Dividend non-payers | 4.31% |
Dividend shrinkers and eliminators | (0.89%) |
Equal-weighted S&P 500 index | 7.65% |
Data source: Ned Davis Research and Hartford Funds.
See? Dividend payers are no slouches. They can deliver a lot of passive income.
The Schwab U.S. Dividend Equity ETF tracks the Dow Jones U.S. Dividend 100 index, which holds about 100 carefully selected stocks with track records of paying dividends for at least 10 years — and which also seem to be tied to high-quality companies. Here’s how the Schwab ETF has performed in recent years:
ETF | Recent Yield | Five-Year Avg. Annual Return | 10-Year Avg. Annual Return | 15-Year Avg. Annual Return |
|---|---|---|---|---|
Schwab U.S. Dividend Equity ETF | 3.5% | 10.91% | 13.55% | 12.30%* |
Vanguard S&P 500 ETF | 1.1% | 13.82% | 16.09% | 13.77% |
Source: Morningstar.com, as of Feb. 9, 2026.
*as of inception date, Oct. 20, 2011
I included the performance of a low-fee S&P 500 index fund for comparison, and you can see that the Schwab ETF isn’t far off from its performance while delivering a lot more income. Better still, healthy and growing dividend payers tend to increase their payouts over time. Here are the ETF’s recent top holdings, which recently made up about 42% of the fund’s value:
Stock | Weight in ETF |
|---|---|
Lockheed Martin | 4.60% |
Bristol-Myers Squibb | 4.29% |
Texas Instruments | 4.27% |
Chevron | 4.21% |
Merck | 4.20% |
ConocoPhillips | 4.13% |
PepsiCo | 4.06% |
Verizon Communications | 4.01% |
Altria | 3.95% |
Coca-Cola | 3.93% |
Data source: Morningstar.com, as of Feb. 7, 2026.
