If you’ve been following SCHD, you might have noticed something puzzling. After more than a decade of dividend growth, it still yields around 3.5%. That feels… low, right? Shouldn’t it be way higher by now? And if it’s not going to increase much, why even hold it?
Here’s the truth: that 3.5% number can be extremely misleading—and misunderstanding it could mean you’re building your portfolio the wrong way. Let’s break it down.
The Dividend Yield vs. Dividend Growth Confusion
Many investors see SCHD’s 14 years of dividend growth and just shrug at 3.5%. But here’s the key: that 3.5% is the yield for someone buying SCHD today, not for someone who has held it for years.
Think of it like buying a rental property 10 years ago for $200,000 with $8,000 annual rent (4% yield). Today, the property is worth $400,000, with $16,000 rent—but your return is 8% on your original investment, even though the current yield appears only 4%.
That’s exactly what happens with SCHD. The market looks at today’s price and yield and thinks it’s low—but for long-term holders, the yield on cost is growing every year.
Why SCHD’s Yield Doesn’t Skyrocket
You might wonder, “If the dividends keep growing, why doesn’t the yield increase like some 10%+ high-yield ETFs?”
It’s simple: as dividends grow, the price rises too. That keeps the current yield lower, and that’s actually a good thing—it signals a stable, profitable, and growing fund.
A low yield on SCHD is a sign of success, not failure. If it suddenly jumped to 8%, something might be wrong under the surface.
The Power of Yield on Cost
If you invested $10,000 in SCHD years ago, over time your dividend income grows—even without adding more money. You could easily be earning 5%, 6%, or 7%+ yield on your original cost.
That’s why chasing the next “hot” fund can backfire. Selling SCHD out of frustration often stops you from growing your dividend and missing out on long-term compounding.
What About the Recent Inclusion of Macy’s?
Yes, SCHD recently added Macy’s. Does that seem odd? Maybe. But SCHD isn’t picking “popular” companies—it uses data-driven selection based on dividend yield, cash flow, financial strength, and return on capital.
Macy’s contribution to SCHD is tiny (0.13% of holdings), while giants like Chevron, Coca-Cola, and Texas Instruments dominate. The key takeaway: SCHD is about portfolio-level stability and income, not trendy picks.
Diversification is Key
Simulations show that combining SCHD with ETFs like VTI and QQQ can balance growth and downside protection. A mix like 40% VTI, 40% QQQ, 20% SCHD can give you long-term growth while smoothing volatility.
SCHD isn’t about winning every year—it’s about building income, stability, and a resilient portfolio.
The Takeaway
- Don’t judge SCHD by today’s yield alone.
- Yield on cost tells the real story.
- Low yield = stability and growth, not failure.
- Diversify your portfolio to balance growth and protection.
💡 Ready to get started and invest in ETFs like SCHD today?
Open a moomoo account and start building your portfolio with ease: Invest in SCHD via moomoo here.
Start your dividend growth journey now—your future self will thank you. 🚀
#SCHD #DividendGrowth #InvestingTips #ETFs #FinancialFreedom #moomoo
