1 High Yield Dividend Growth ETF to Buy for $30 and Hold Forever

Dividend stocks have a huge following in the investing community. Who doesn’t like the idea that the companies you invest in pay you to hold their shares? Still, the nuances of dividend investing are more up for debate because there are many ways to execute a dividend strategy, and the right stock for you might not make sense to another investor.

If you’re not sure how to get your dividend shares portfolio, you might want to take a look at the Schwab US Dividend Equity ETF (NYSEMKT: SCHD).

It checks all the essentials: yield, growth and diversification. Moreover, it fits into almost any investment budget. The fund recently conducted a 3-to-1 stock splitso shares cost only $30 today.

Any long-term dividend investor should consider buying and holding the ETF forever. This is what makes this ETF so special so good.

1. Diversification with one ticker symbol

If you didn’t already know, exchange traded funds (ETFs) are groups of individual stocks that trade under a single ticker symbol. An ETF can be a stock market index or follow an investment strategy. The Schwab US Dividend Equity ETF seeks to capture the construction and performance of the US Dow Jones Dividend 100 Index.

The ETF has 103 holdings, including well-known dividend stocks such as Cisco systems, Home Depot, BlackRock, Bristol Myers Squibb, Lockheed Martin, Chevron, Verizon, Pfizer, United Parcel ServiceAnd PepsiCo. Building a portfolio takes a lot of work and time, and there are thousands of publicly traded companies to choose from.

When you buy the Schwab US Dividend Equity ETF, that work is done for you and it only costs you one expense ratio of 0.06%. You get a well-diversified portfolio of dividend stocks from the moment you own your first share of this ETF.

2. Generous returns once you purchase it

Dividend investors generally fall into two camps:

Those who want to maximize their dividend income early (high dividend yield, slower dividend growth).
Those who want a dividend that grows more over time (low starting yield, faster dividend growth).

The Schwab US Dividend Equity ETF does a pretty good job of appealing to both sides of the fence.

The ETF’s current starting yield is 3.4%, which is consistently higher than the S&P500‘s:

SCHD Dividend Yield data Ygraphs

Income-oriented investors should also consider the current interest rate environment. The Federal Reserve recently cut its benchmark interest rate for the economy for the first time since the pandemic. It is unclear how low interest rates will ultimately become, but if the economy enters an “easing cycle” of falling interest rates, this will reduce interest rates on savings accounts, for example. This will force investors to look for income elsewhere, making the Schwab US Dividend Equity ETF more attractive.

3. Accompanied by solid growth

Most stocks offer high returns or growth, but the Schwab US Dividend Equity ETF offers surprisingly strong growth considering its high starting yield. As shown below, the ETF has increased its dividend by 174% over the past ten years.

You won’t find many individual stocks with that combination of yield and sustained dividend growth!

SCHD Dividend data Ygraphs

The Schwab US Dividend Equity ETF isn’t perfect. It has lagged the S&P 500 in total returns over the past decade, largely because it lacks the exposure to big tech companies. that the S&P 500 does that. These billion-dollar tech companies have grown thanks to opportunities in cloud and artificial intelligence, helping to drive the broader market. I’d say the Schwab US Dividend Equity ETF has competed very well, given the lack of technology exposure, and you’re probably buying the ETF for the higher dividends, and not purely for the total return.

It’s not the perfect ETF for every investor, but it’s hard to find a more complete ETF than the Schwab US Dividend Equity ETF. Any long-term dividend investor should consider adding and holding shares over time, creating a snowball of dividends that pays you more and more as it grows.

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Justin Pope has positions in Chevron. The Motley Fool holds positions in and recommends Bristol Myers Squibb, Chevron, Cisco Systems, and Home Depot. The Motley Fool recommends Lockheed Martin, United Parcel Service and Verizon Communications. The Motley Fool has one disclosure policy.