The recent 1,000+ point up and down gyrations in the Dow Jones Industrial Average at the time of this writing are giving many investors sleepless nights.
Fears of an impending Bear Market are triggering searches for other investment assets that will remain resilient until a Bull Market is confirmed to be back.
Schwab’s US Dividend Equity ETF has over 75% of its holdings in a collection of stocks, including Dividend Aristocrats and other companies with long, solid track records, making it worth consideration in a Bear Market environment.
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The prospect of a Bear Market can be as sobering as a plunge into ice water for those who have become too accustomed to a strong Bull Market run, led in recent years by soaring tech stocks. Bear Markets are the inevitable down cycle side of markets that react to geopolitical and financial events. In these cases, capital also seeks other assets for safety and returns. These asset classes, which are usually more stable and reliable, can include:
Exchange Traded Funds (ETF) have now expanded to include all of the above categories, adding a layer of diversification risk mitigation to the equation. ETFs are predicated on underlying indexes, so companies may meet the criteria for inclusion in multiple categories, such as being in a defensive sector (i.e., healthcare) and also in a Dividend Aristocrat sector (25 or more consecutive years of dividend increases).
The Schwab US Dividend Equity ETF (NYSE: SCHD) is an ETF that meets several of these crossover categories, making it worth consideration for portfolio inclusion, especially during turbulent market periods.
A pioneer in the retail securities industry, Charles R. Schwab is essentially the father of discount brokerage. Starting his namesake firm in 1975, Schwab went on to become the largest discount securities dealer in the US. As it continued to grow, Charles Schwab & Co. also branched out into many other areas of the financial investment arena.
With over $10 trillion Assets Under Management, Charles Schwab is currently one of largest asset managers on the globe, ranking behind BlackRock and Vanguard, and going neck and neck with Fidelity. The firm’s catalog of funds for individual and institutional investors have achieved notice for their performance, usually equaling and occasionally surpassing those of its rivals.
The Schwab US Dividend Equity ETF is an exchange traded fund that is designed to track The Dow Jones U.S. Dividend 100 Index. For inclusion in this index, stocks have to meet the following requirements:
A 4 step calculation that takes free cash flow, total debt, return on equity, indicated annual dividend, and five year dividend growth rate determines a ranking. The top 100 scoring companies are included in the index. If two companies have the same score, the one with the larger dividend gets the higher ranking.
The Schwab US Dividend Equity ETF holds stocks in a relatively close equivalent ratio to the Dow Jones U.S. Dividend 100 Index, with perhaps a couple of additional stocks, at any given time. It attempts to parallel, and, when possible, exceed the returns of the underlying index.
Dividend Yield
4.04%
Dividend Payment Frequency
Quarterly
Dividend Growth
16.67%
Dividend Payout Ratio
61.04%
Total Assets
$62.3 billion
Daily Trade Volume Average
16.9 million shares
Beta (5 year)
0.74%
1-Year Return
8.04%
5-Year Return
17.32%
10-Year Return
11.44%
Inception Date
10-20-2011
Inception Price
$8.40
Expense Ratio
0.06%
Sector wise, SCHD’s top 5 heaviest weighted industrial areas are:
The top 5 weighted holdings in SCHD are:
A $10,000 investment made 10 years ago in SCHD that reinvested dividends would have a cumulative value of $29,277.00.
Due to the composition of the Dow Jones U.S Dividend 100 Index, SCHD’s portfolio contains both a sizable collection of Dividend Aristocrat, Defensive Cyclical, and Essential Services and Goods stocks. Bear Markets are less prone to affect these companies as much as high growth ones for several reasons:
Bearing this in mind, SCHD would likely fare well in the event of a Bear Market for the following reasons:
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