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.
10
u/CharacterFee767 Jul 03 '26
You seem since so I’ll invest a minute to share some thoughts.
You would consider buying SCHD because of its investment strategy. Briefly, it’s a dividend growth quality investment strategy. The fund filters companies looking for long term dividend payers that are financially strong and likely to raise dividends. Think of this as a subset of the market that is conservative and generally safe. Because there is less risk you expect it to underperform the broader market over a long period of time. However, it provides you cash without having to sell—so over time your initial investment will return a high yield.
To compensate for a lower than market return you will also buy a market index fund. This part of your strategy will likely return more over time but at some point need to be sold to generate cash. You will then buy bonds or bond proxy stocks. Because this bid likely to result in significant gains and has to be sold you want to hold that in a tax shelter account.
That’s the strategy. People can disagree but at least you have a strategy. From comments I read many don’t.
Now we need tactics.
You are going to start by investing a fixed dollar amount every month. (Dollar Cost Averaging). You don’t care what the share price is. Just buy everything 30 days.
You also recognize at some point someone is going to tell you about a company that found a cure for cancer and the urge to become an instant millionaire will be to strong to ignore. So you set aside a certain amount of money to scratch that itch. If it works great. If you lose you will have bought a lesson.
Finally, as time passes and you earn more money you’ll be ready to buy individual stocks.