SCHD Dividend ETF and Alternatives Review

Summary

This video provides an in-depth look at the Schwab U.S. Dividend Equity ETF (ticker: SCHD) and compares it to other popular ETFs like Vanguard and ARK Invest. The presenter discusses key metrics, such as performance over 1, 3, and 5 years, dividend yields, and expense ratios. The video highlights the importance of understanding ETF holdings and how stock splits, like SCHD's upcoming 3-for-1 split, can affect popularity. Investors are advised to weigh growth versus dividend-focused investments, considering broader market trends, sector performance, and individual preferences for tech or income-generating stocks.

Takeaways

• 📈 The Schwab US Dividend Equity ETF (SD) has performed well with a 21% increase in the last year and a 56% increase over the last 5 years.
• 🔄 SD is undergoing a 3-for-1 stock split on October 10, 2024, which will make it more accessible to retail investors without changing its value.
• 💡 The video aims to inform viewers about SD and its alternatives to help make informed investment decisions.
• 📊 SD has a low expense ratio of 0.6%, which is favorable compared to higher-cost ETFs like Arc Invest with a 75 basis point expense ratio.
• 📉 Past performance is highlighted with a reminder that it's not a guarantee of future results, especially with market variables like interest rates and global growth.
• 📚 The importance of diversification is discussed, noting that ETFs provide a basket of stocks to mitigate risks associated with individual company performance.
• 📋 A comparison of different ETFs is presented, showing varying expense ratios, performance, and top holdings.
• 💼 The video discusses the top holdings of various ETFs, emphasizing how concentrated they are and the potential impact on portfolio risk.
• 📈 The script points out that the S&P 500 ETFs are heavily tech-focused, which could be a drawback for those looking to diversify their tech investments.
• 💡 The presenter encourages viewers to consider a mix of investment types beyond stocks, such as bonds, CDs, and cash, for a balanced portfolio.

Q & A

What is the main focus of the video?

The main focus of the video is to discuss the Schwab U.S. Dividend Equity ETF (SCHD), its recent performance, an upcoming stock split, and comparisons with other popular dividend and tech ETFs.

What is the significance of the stock split mentioned in the video?

The Schwab U.S. Dividend Equity ETF (SCHD) is undergoing a 3-for-1 stock split on October 10, 2024. While the stock split does not change the overall value of the investment, it makes shares more accessible to retail investors by reducing the price per share.

How has SCHD performed over the past year and five years?

SCHD has increased by 21% in the past year and by 56% over the last five years, making it a consistent performer in the dividend ETF space.

What are some of the alternatives to SCHD that are discussed in the video?

Alternatives to SCHD mentioned in the video include other dividend ETFs like Vanguard's VYM, iShares' DGRO, and tech-heavy ETFs like ARK Invest and QQQ.

What is the expense ratio for SCHD compared to other ETFs?

SCHD has a low expense ratio of 0.06%, which is favorable compared to higher expense ratios in tech-focused ETFs like ARK Invest, which charges 0.75%.

What are the top 10 holdings in SCHD?

The top 10 holdings in SCHD include major companies like Home Depot, Verizon, BlackRock, Bristol-Myers Squibb, Chevron, Cisco, Lockheed Martin, Pfizer, AbbVie, and Texas Instruments. These holdings make up 41% of the ETF.

What are some reasons an investor might choose SCHD over other ETFs?

Investors might choose SCHD for its low expense ratio, consistent dividend yield of 3.46%, and its focus on dividend-generating stocks, which can offer stability compared to the volatility of tech-heavy ETFs.

What are the differences between SCHD and DGRO?

SCHD and DGRO are both dividend-focused ETFs, but DGRO has more exposure to growth stocks like Apple and Microsoft, offering a mix of growth and dividends, while SCHD is more focused on traditional dividend-paying stocks.

How does the concentration of holdings differ between SCHD and other ETFs like VYM?

SCHD has a higher concentration of its holdings in the top 10 stocks (41%), whereas VYM has a lower concentration with its top 10 holdings making up around 24%. This means SCHD is more concentrated in fewer companies, while VYM is more diversified.

Why might an investor prefer dividend ETFs over tech-heavy ETFs like QQQ or ARK?

An investor might prefer dividend ETFs like SCHD for stability and income generation, especially in uncertain market conditions or when tech stocks are underperforming due to factors like rising interest rates. Tech-heavy ETFs like QQQ or ARK are more volatile and growth-oriented, which may not suit all investors.