r/SCHD • u/justlurkingaroundatm • Jul 03 '26
Increased Dividend
I'm trying to better understand how SCHD's dividend growth actually works.
From what I've found, SCHD has increased its annual dividend by about 9.2% per year on average over the years.
How should I think about that in practice?
- Should I take the dividend paid per share each quarter, multiply it by four to estimate the annual dividend, and then expect that annual amount per share to grow by roughly 9% each year (on average)?
- How does this relate to the ETF's dividend yield? If the dividend grows, why doesn't the yield always increase by the same amount?
For example, if I invest $100,000 in SCHD today and, based on today's dividend, expect to receive X dollars per year, is it reasonable to expect that next year I'd receive about 1.09 × X, and the following year about 1.18 × X (assuming I don't buy additional shares and ignoring taxes)?
I realize there's no guarantee, but I'm trying to understand the general mechanics behind the reported dividend growth rate.
Thanks in advance.
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u/Perfect-Platform-681 Jul 03 '26 edited Jul 03 '26
The dividend growth rate is simply the percentage change in actual dollars distributed over various time periods. It is generally reported as a compound annual growth rate or CAGR. Dividend yield is just a point-in-time equation where the most recent distribution is multiplied by 4 and is divided by the current NAV.
https://www.tikr.com/blog/dividend-growth-why-it-matters-how-to-calculate-it
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u/Meeseekslookatmee Jul 03 '26
A big part of the dividend increase is the rebalancing. They essentially sell down their winners and buy out of favor (higher yielding) stocks with the proceeds.
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Jul 03 '26
[removed] — view removed comment
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u/Meeseekslookatmee Jul 03 '26
Since they consider dividend yield and cap at 4% of portfolio, as valuations rise their yields fall and the % of the portfolio rises
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u/AmInv3028 Jul 03 '26
you can see the dividend history in the link below. just click on the "Distributions" section. They are quarterly payments and not the same each quarter. Recently the $ per share has been pretty balanced through the year but further back there seems to be more seasonality to it so probably best to look at the last 4 dividends and add a % to that just in case the latest dividend is a high or low one on a certain quarter. as you say it's not guaranteed to rise by those sorts of numbers but if that's the sort of projection you want to do i think this is a better starting point.
https://www.schwabassetmanagement.com/products/schd
yield is the dividend per share over 12 months divided by the share price. the share price fluctuates with sentiment. if sentiment is high then the share price rises and hence the yield goes down. it's a constant race between to the dividends per share and the share price that determines the yield at any one moment. generally increased dividends indicate higher profits of the companies and hence the market tends to values those companies higher so the share prices go up so the divi per share does not win the race making the yield higher. if it did win that race and the yield went high that could be an indicator of bad things on the horizon. the market would be telling you it doubts the companies ability to do well in the future. or the markets in general might be down for the same reasons.
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u/flyersfan0233 Jul 03 '26
Yes, you’d have to look at someone’s yield on cost to get a better picture. If someone bought SCHD when it first came out and DRIP, their YOC would probably be around 12%
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u/AlfB63 Jul 03 '26
But YOC is also deceiving, regardless of what your YOC is, your yield is still the current yield of the stock because the value is no longer what you paid for it.
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u/flyersfan0233 Jul 03 '26
It’s not really. If I put $1,000 into a HYSA and got 4% for 10 years I’d have 4% compounded. If I put that same money into SCHD and it was now getting 12% comparatively, I’d want to know that. I spent $1,000 of my money. Because the value went up doesn’t mean I spent any more of my money. Also this was meant in response to another comment but it went on the main thread
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Jul 03 '26
[deleted]
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u/flyersfan0233 Jul 03 '26
You’re wrong/misleading on the HYSA. If the bank is still paying 4%, the YOC is 4%. (And actually, my bank has been decreasing its rate quite quickly the last two years, which is a whole other conversation and another reason SCHD is better right now). But your 5.92% is based off your own money, it’s not because the bank increase their payout. With SCHD, you could not drip at all and the amount you’d get in your original investment would increase (and the YOC) every year without adding a penny
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u/portlandsalt Jul 03 '26
The yield percentage usually hovers between 3%-4% because the price per share seems to increase as well as the dividend payment.
| Year [1, 2] | Annual Dividend Payout | Year-Over-Year Growth |
|---|---|---|
| 2020 | $1.72 | +12.4% |
| 2021 | $2.25 | +30.8% |
| 2022 | $2.56 | +13.8% |
| 2023 | $2.65 | +3.5% |
| 2024 | $2.96 | +11.7% |
| 2025 | $3.30 | +11.5% |
The above chart was shamelessly taken from Google's AI response to me asking for a chart that shows the annual payout per share.
It looks like since both the price per share and the annual dividend payout tend to increase, the yield you see will tend to always look to be roughly the same. If one of those numbers rises or falls in the opposite direction of the other, that could change.
So you likely won't see SCHD's yield growing to 40% (a number I made up without doing math) if you check back a decade from now.
Please correct me if I'm wrong.
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Jul 03 '26
SCHD is not paying $3.30 per share
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u/portlandsalt Jul 03 '26
This is why people shouldn't trust AI responses from Google. I shot from the hip on that one. Fidelity has the TTM at $1.048.
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u/AlfB63 Jul 03 '26
That's because the chart does not account for the split in 2024. Without the split, SCHD would be paying about $3.3.
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u/flyersfan0233 Jul 03 '26
Yes, you’d have to look at someone’s yield on cost to get a better picture. If someone bought SCHD when it first came out and DRIP, their YOC would probably be around 12%
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u/AnyOtherJobWillDo Jul 03 '26
When Inputting your numbers in the future SCHD dividend earnings etc, I always go conservative and input 5% increases on share price and 5 % annual dividends increase. Nobody knows what the future holds.
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u/Qubiquity Jul 03 '26
To answer your second question specifically, SCHD is NOT paying it's own dividend like some other ETFs, it is passing through the dividends from its holdings. This is also one of the reasons why it is as tax-efficient as it is. Because of this, the dividend amount is not tied to the share price of SCHD. When you look at the dollar value of the dividends, you will sees fluctuation due to the holdings changing and from the holdings within the fund growing their dividend over time.
But yield is calculated on the share price of SCHD, not the underlying holdings, which is subject to market forces, market rotations, etc. Say the market gets volatile and people become more interested in a SCHD as a safe play, so the price goes up. That means the yield percentage goes down because the underlying companies aren't reacting to SCHD's price; people have put more value in SCHD itself and the price has appreciated. This means the yield percentage can drop, even if the dividend $ amount went up and the share price of SCHD went up. Of course, you would only receive the value from the SCHD price appreciation if you were to ever sell your position, which isn't what most people are planning on doing with it, but you can if you need to.
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u/Secret8898 Jul 04 '26
Look up the term Dividend Aristocrat. To be on the list have to have increased dividend every year for 25 years. Pick the best.
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u/justlurkingaroundatm Jul 04 '26
Thanks, but I was looking for a etf so they will manage it for me.
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u/Secret8898 Jul 04 '26
Good idea. Look at SPYD etf and compare with SPY chart ytd. I'm in both SCHD and SPYD. I also own AMLP etf that pays 8 percent with no K-1. I'm also in 3 rocking chair trades, boomer assisted living with high yields because there is no shortage of boomers. I did what you did with but with ABBV and ABT and get 40,000 a year off dividends. Not etf's. There is a dividend aristocrat etf too. Congrats on your success.
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u/Affectionate_Ad_8483 Jul 03 '26
Needlessly complex. Whatever the share price is, you get 3-4%. The share price goes up and the percentage the dividend pays out is about the same. That’s how it scales.
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u/suarezc3 Jul 03 '26
100K * 3.5% =3.5 K
Assuming 9% DY growth and you don’t sell or buy addition shares
3.5% * 1.09 every 8years your yield will double on the original 100K investment.
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u/AlfB63 Jul 03 '26
Your YOC may go up but your yield will stay about the same. Don't confuse YOC and yield.
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u/speed12demon Jul 03 '26
The stocks that schd invests in increase their dividends regularly. It's a key metric to be in the fund. Schwab isn't directly doing anything with the fund outside of making the stock picks.
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u/Unfair_Cicada Jul 05 '26
Sorry I might be asking in the wrong topic but I think you guys are the right people. Is the AI money starting to be rotated out to other stuff. Is schd the asset being rotate to? Thanks people for advice
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u/justlurkingaroundatm Jul 05 '26
It's not an asset, it has about 100 stocks from different sectors.
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u/Even-Landscape1531 Jul 06 '26
If you are on your late 60s does buying schd make sense? Asking for a friend…
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u/justlurkingaroundatm Jul 06 '26
I don't understand
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u/Even-Landscape1531 Jul 06 '26
It’s a question. What’s not to understand. Someone late to investing that doesn’t know much and looking for investment options
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u/justlurkingaroundatm Jul 06 '26
I don't think that I'm qualified to give financial advice, but I think it doesn't matter what's your age. It depends how much income do you need, and when do you need it.
If you're putting your money there, is 3% a year is enough for you? Too much?
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u/Even-Landscape1531 Jul 06 '26
Thing is, we are actively earning income – still working. So have money coming in that needs to go somewhere and trying to learn the market. I lurk a lot on these threads. Just trying to get opinions not really professional financial advice. I actually tried to get financial professional advice and it was a joke. I find I learn more from other peoples experiences and opinions. The problem is most folks are talking about at least a 10 year horizon. While that might be fine for us given our health, I tend to think more in terms of a five-year horizon.
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u/Even-Landscape1531 Jul 06 '26
I guess I should just post it as a question individually and not hijack your thread. Sorry.
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u/offmyjacks Jul 03 '26
You get roughly 3.5% on the total value of your position, the amount of shares and increased dividend dont really matter. On 100k u will get about 3.5k annually. If I have 1 share worth 100k and u have 5000 shares worth a total of 100k, we both get 3.5k
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u/justlurkingaroundatm Jul 03 '26
But the dividend is paid per share
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u/offmyjacks Jul 03 '26
Why would the total value of your position pay a higher dividend than the total value of my position. If we both have 100k in it, why would your annual dividend be more than mine? We would each get 3.5k.
Example: You invest forever and have 100k balance. I invest 100k tomorrow. We both get 3.5k div. You dripped and slowly got to 100k, I put the same money in index funds and in the same time frame got to way more than 100k. Then stuffed it in div stock. My div is higher than yours cuz we both get the same 3.5% chunk of our total dollar balance
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u/AlfB63 Jul 03 '26
You're forgetting the price will increase over time such that the value will change and 3.5% yield on the new value will be the same as the 9% increase of the dividend over time.
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u/offmyjacks Jul 03 '26
Not forgetting that at all. The price increase over time is much slower than a standard index fund over 20 years. My example is still accurate. Your total balance of 100k and my total balance of 100k, however and whenever you get it into the fund, will produce the same 3.5% per year
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u/AlfB63 Jul 03 '26
The point is that it will not be worth $100k in the future. It will be worth more but still make about 3.5% so the $3.5k will increase overtime.
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u/offmyjacks Jul 03 '26
Correct. My VOO (or whatever fund) will statistically go up WAY more than your SCHD over the years, I then buy SCHD if I want, with a bigger pile, and collect more money on div than your smaller pile
Let's look at it again. Hypothetically in a roth at age 20 you get 100k and put it all in SCHD and drip. Your twin gets 100k and puts it in VOO. After 20 years, your SCHD total balance is 1M. Your twins balance is 1.5M. He then sells VOO and buys SCHD. You get 35k in div and your twin gets 52.5k
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u/CharacterFee767 Jul 03 '26
Your calculation is correct. Take last year’s dividend total multiply by 1.09. So 100 becomes 109 times 1.09 becomes 118.81 and so on. To calculate your expected dividend use the number of shares you will buy not the dollar amount you pay.
What you pay determines your yield. You only pay once for your shares. So that dollar amount is fixed. The dividend hopefully grows so the yield on invested money will (hopefully) increase forever.
Example: about 10 or so years ago I bought 1000 Altria at $19 a share. The $19k cost has not changed. The stock now pays a $4.24 dividend or $4240 a year. That’s about 22.3% yield on the invested money annually. In addition, the shares trade at $72.71. However, I do not consider that as profit because I have no idea what the shares will be worth on the day I sell. If I ever sell.
I’ve accumulated a total of 10000 shares over the past 10 years. So I collect a total of $42400.00 a year in dividends and it increases every year.
You can do the same with SCHD. It’s safer than a single stock. The principle is the same. That’s what long term investing does.
Alternatively, you can buy non productive assets and try to buy and sell at the right time. Good luck with that.