Last Updated on June 21, 2024 by Chin Yi Xuan

The beauty of dividend investing is we continue to receive dividends regardless of market conditions.

What if there’s something better? What if your investment pays you MORE dividends as time goes by?

With dividend ETFs such as Schwab US Dividend Equity (SCHD), this is certainly possible.

In this post, let us look at SCHD, and 3 key reasons why it is my favorite dividend ETF to hold for the long term in my Freedom Fund!

p.s. Looking to learn dividend investing? My ultimate guide to dividend investing is coming REAL soon! Sign up HERE to be the first to know when it is ready and enjoy extra perks & discounts!


Quick Recap: What is an ETF & why dividend ETF?

Exchange-Traded Fund (ETF) is essentially low-cost funds listed in the stock market, where you can buy and sell just like stocks.

Simply put, ETFs are funds that track the performance of a basket of assets (eg. Stocks, bonds, commodities).

As such, dividend ETFs are ETFs that track a basket of dividend-paying assets, such as stocks and bonds.

ETF is an amazing investment choice for beginners and experienced investors alike.
ETF is an amazing investment choice for beginners and experienced investors alike.

Why invest in dividend ETFs?

Dividend ETFs make it easy for investors to gain diversified exposure to a basket of dividend-paying stocks (or other assets), without having to pick individual stocks.

The diversified nature of ETFs significantly reduces the impact should a single company perform badly.

LEARN MORE: Introduction to Exchange-Traded Fund (ETF)

What is SCHD?

Schwab US Dividend Equity (SCHD) is a dividend ETF listed in the US stock market since 2011.

SCHD tracks the Dow Jones U.S. Dividend 100 Index, which measures the performance of fundamentally solid US-listed companies with a track record of consistent dividend payment.

Key info:

  • ETF manager: Charles Schwab
  • Holdings: US-listed stocks
  • Expense Ratio: 0.06% per annum
  • Dividend payout: Quarterly

3 key reasons why I invest in SCHD

#1 SCHD has a strong track record of growing dividend payout

Since its inception in late 2011, SCHD has recorded a 10-year streak of increasing distribution (even as Covid broke out in 2020!).

Even more impressive, despite a challenging 2022, SCHD managed to grow its distribution per unit (DPU) compared to the prior year:

Why is SCHD’s growing dividend payout so attractive long term?

Assuming that you invested a $1,000 one-off in SCHD in January 2012, the annual dividend that you’d receive would grow from $31.30 in 2012 to $113.88 in 2021. (Considering dividend reinvested)

Why is this significant?

Because if we were to translate the dividend amount ($) to yield on cost (%), this means your dividend yield from the $1,000 investment would grow from an initial 3.13% in 2012 to 11.39% in 2021!

[IMPORTANT] It is important to note this discussion is a reference to the past, and past performance is NOT indicative of future returns.

#2 Solid Overall Performance (SCHD vs S&P500)

SCHD not only shines with its impressive track record of growing dividends. With a 10-year annualized return of 13.40% (as of 31/10/2022), SCHD’s overall performance has also been also solid for the past decade.

In fact, SCHD’s return slightly outperformed the S&P500 (which represents the largest 500 US-listed companies) which achieved a 10-year annualized return of 13.10%.

SCHD vs VOO annual return (Oct 2022)
SCHD vs S&P500 (VOO) Annual Return since 2012 (as of 31/10/2022) [Source: Portfolio Visualizer]


#3 Relatively Low volatility

On top of both key reasons stated above, SCHD also produced returns at relatively lower volatility than the stock market (S&P500).

Beta measures the volatility of a stock in comparison with the market (usually the S&P500) as a whole.

As of 31/10/2022, SCHD recorded a 10-year beta of around 0.9 (source: Yahoo finance), which means SCHD is about 10% less volatile than the S&P500 (beta: 1.0) in the past 10 years.

In other words, investors that invested in SCHD enjoyed better returns without experiencing swings as volatile as the overall market in the past 10 years.

SCHD vs VOO drawdown comparison
SCHD vs S&P500 (VOO) Drawdown Comparison. [Source: Portfolio Visualizer]

SCHD Holdings

SCHD’s relatively stable volatility nature has a lot to do with the type of stocks that it held. How does it know which stocks to include?

SCHD tracks the Dow Jones U.S. Dividend 100 Index. Essentially, stocks are filtered based on the following criteria:

  • Dividend payout: Minimum 10 consecutive years of dividend payments.
  • Size of the company: Minimum Float Adjusted Market Cap of $500 million.
  • Liquidity: Minimum three-month Average Daily Volume of Trading of $2 million.

Then, qualified stocks are further ranked as per the following criteria:

  • Dividend yield
  • 5-year dividend growth rate
  • Company’s financial health (ie. Free cashflow vs debt)
  • Return on equity (ROE)

As a result, companies that are qualified and have higher weightage in SCHD holdings are usually companies with strong financial health that have a solid track record of dividend payout.

Top 10 holdings of SCHD:

As of 31/10/2022, SCHD holds about 103 stocks. The top 10 companies make up >40% of SCHD holdings:

Top 5 Sector Exposure of SCHD

In addition, SCHD filtering method also means companies that qualified are commonly found in more stable sectors, such as the financials and industrial sectors.

2 Things/risks to know while investing in SCHD:

At a glance, SCHD is a pretty balanced dividend ETF with 103 holdings across different sectors. That said, here are 2 key things we need to know while investing in SCHD:

#1 Geographical risk

SCHD offers 100% exposure to US-listed companies. This means any domestic/international US-related events & conflicts will influence the performance of SCHD.

#2 Dividend withholding tax (WHT) for non-US residents

For foreign investors that invest in US-domiciled ETFs such as SCHD, there is a dividend withholding tax (WHT) for dividend payouts. As an example, there is a 30% dividend WHT for investors from Malaysia and Singapore.

Example: 3.5% dividend yield – 30% WHT = 2.45%

Personally, while this is not ideal, I still find SCHD’s solid track record of increasing dividend payout outweighs the dividend withholding tax factor. It is the only US-domiciled dividend ETF that I wouldn’t mind investing in.

LEARN MORE: A guide to Dividend Withholding Tax (WHT) – all you need to know! 

Who should invest in SCHD

SCHD is a dividend ETF with a solid track record of growing dividends, while providing respectable growth opportunities at the same time.

In my opinion, SCHD would fit well with:

  • Long-term investors (>10 years of time horizon) looking to invest for a steady & reliable stream of dividend income.
  • Dividend investors with portfolios in Malaysia and/or Singapore stocks and are looking for diversified & stable exposure to the US stock market.

How to invest in SCHD?

Investing in SCHD is easy as many brokers offer access to the US stock market.

Malaysian investors can consider Interactive Brokers (IBKR), a global broker that I personally use to build my Freedom Fund (my dividend portfolio).

READ MORE: Interactive Brokers (IBKR) Review

Interactive Brokers (IBKR) Review

Explore Interactive Brokers (IBKR) Today!

No Money Lah’s Verdict

So, how do you like SCHD?

As a dividend investor with about 15 – 20 year time horizon, I think SCHD is a gem thanks to its track record of increasing dividends (even more so in a challenging 2022!).

I hope this review has been helpful!

If you like to learn more about dividend investing, I am excited to share that my ultimate guide to dividend investing is coming REAL soon! Sign up HERE to be the first to know when it is ready and enjoy extra perks & discounts!


Any of the information above is produced with my own best effort and research. 

This post is produced purely for sharing purposes and should not be taken as a buy/sell recommendation. Past return is not indicative of future performance. Please seek advice from a licensed financial planner before making any financial decisions.

This post may contain promo code(s) that afford No Money Lah a small amount of commission (and help support the blog) should you sign up through my referral link.


Chin Yi Xuan

Hi there! I am Yi Xuan. I am a writer, personal finance & REIT enthusiast, and a developing trader with the goal to become a full-time funded trader. Every week, I write about my personal learnings & discovery about life, money, and the market.

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