Forget SCHD ETF: Why Dividend Aristocrats are the Better Investment Choice
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The Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD) has long been a popular choice among dividend investors. With a solid yield and low fees, it has attracted many seeking income from their investments. However, when comparing SCHD to the Dividend Aristocrats, it becomes clear that the latter may be the superior choice.
One of the main reasons why the Dividend Aristocrats stand out is their historical performance. Since its inception in 1990, the Dividend Aristocrats Index has outperformed the S&P 500, as well as SCHD over the last decade. Companies included in the Dividend Aristocrats list have a track record of not only paying dividends consistently for 25 years but also increasing them annually. This criteria ensures that these companies are financially sound and have a strong dividend growth streak.
In terms of portfolio composition, while there is some overlap between SCHD and the Dividend Aristocrats, the Aristocrats have certain advantages. They have a higher exposure to the energy sector, which is currently showing positive market fundamentals. Additionally, the Aristocrats have a better long-term dividend growth rate compared to SCHD stocks.
When it comes to balance sheet strength, the Dividend Aristocrats also come out ahead. They have lower debt/equity ratios, indicating lower balance sheet risk compared to SCHD stocks. Furthermore, while SCHD may have lower fees and higher liquidity, the Dividend Aristocrats offer a more reliable option for long-term dividend growth.
Overall, while SCHD is not a bad investment choice, the Dividend Aristocrats offer a more compelling option for those seeking consistent income and financial stability in their portfolio. When considering factors such as historical performance, portfolio composition, and balance sheet strength, the Dividend Aristocrats emerge as the better investment choice over SCHD.