The stock market has had a rough start to 2025 and growth investors are worried about what might come next. Technology stocks have shown volatility but many have also generated significant gains in the first two months of the year. The current sentiment is highly volatile with investors worrying about the tariffs, the state of the economy, and consumer sentiment.
This is why now is a good time to park your funds into exchange-traded funds. Since they are low-risk and offer diversification, they can be an ideal addition to your portfolio. If you are a passive income investor looking for low-risk stocks, Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD | SCHD Price Prediction) could be an ideal choice. In this article, we dive deep into Schwab’s fund and see why it is the safest way to stay invested.
Key points in this article:
- The current market volatility has drawn investors towards low-risk ETFs.
- The Schwab U.S. Dividend equity ETF is an ideal choice for passive income investors.
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Safe ETF in volatile times
The Schwab U.S. Dividend Equity ETF tracks the Dow Jones U.S. Dividend 100 index. Trading at $27.95, the Schwab U.S. Dividend Equity ETF is very close to the 52-week high. It has an attractive dividend yield of 3.49% and a low expense ratio of 0.060%. This ETF has been up 5% in the past year and over 100% in the past five years.
In the last month, the ETF (-1.74%) has outperformed the S&P 500 (-6.44%) and it has the ability to produce steady dividend income, no matter the market movement. In 2024, the ETF underwent a three-for-one stock split which increased the number of outstanding shares and reduced the Net Asset Value per share.
It holds 101 shares and has a diversified portfolio focusing on dividend stocks. Its highest holdings are in Abbvie Inc. and Amgen Inc. An investment of $10,000 in the ETF in 2015 would triple your money in 2025. Its portfolio includes:
- Financials: 18.73%
- Health care: 16.67%
- Consumer staples: 14.37%
- Industrials: 13.28%
- Energy: 11.67%
Steady dividend growth
SCHD has some of the biggest dividend-paying companies including Coca-Cola, Cisco, Pfizer, and Pepsi. The diversification makes it one of the top ETFs today. With the ongoing market volatility, a diversified ETF can be a safe and stable way to earn passive income. Investing in an ETF is much cheaper than buying individual stocks of these top blue-chip companies. Additionally, the ETF will not see as much volatility as the individual stocks do.
The portfolio is supplemented by companies that have the perfect blend of dividend growth and dividend income. This will help investors build an ideal risk-reward profile. Companies like Chevron, Verizon, United Parcel Service, and British American Tobacco boast very strong dividend yields and high financial stability. Each of these companies have a dividend yield higher than 4%.
The ETF is ideal for passive income investors. Since its holdings include some of the Dividend Aristocrats who have raised dividends consistently, the ETF has also shown steady growth. The fund has steadily increased payouts for 13 consecutive years.
The verdict
The best thing about investing in this ETF is that you will not see a significant decline in your investment, despite market volatility. Additionally, it will give you a share of the top U.S. companies that have shown strength, resilience, and steady growth in the past five years. Once we see a steady economic environment, the fund may perform better with its high dividends and low-cost expense ratio.
The disappointing performance of the S&P 500 has led investors to start looking for safe, low-risk investment alternatives. The ETF allows investors to focus on companies that pay consistent dividends while lowering volatility. Wall Street is bullish on the stock and analysts have a moderate buy consensus.
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