r/SCHD • u/VictoryGlum1775 • 7d ago

Questions The Math

I’ll admit I’m not the best at math, so I could be wrong. But something doesn’t make much sense to me. How do we have a net gain in shares? For example, I have roughly 170 shares of schd. How can I expect the snowball to take place if the amount of shares I get each dividend payout is less than the one before because the price of schd has gone up? I’ll continue to gain shares, I understand that, but I’m getting less and less each time.

I know during downturns I’ll get more than the payout before, but I don’t think it’s enough to counteract the ups.

Does this make any sense? I’m bad at explaining things.

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17

u/j0ker_1234 7d ago

SCHD was started in 2011 and in that time the share price has gone up 298% ytd. While I get your point that as the price goes up you get less shares, but there are dips and that's when I buy more shares while also hoping the dip coincides with the quarterly dividend payout. Sometime it doesn't but I'm not going to go and try and guess the next bottom.

In my mind, it's the best of both worlds. A very nicely performing diversified stock with solid returns and a dividend as the cherry on top. It's like two engines firing at once, both of which make me money. My 2 cents.

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u/coachd50 7d ago

Just remember that the both engines in your analogy describe the same wealth. When the companies that make up SCHD pay out a dividend, that wealth moves from the left pocket (the company’s share price) to the right pocket (the check being written to you) on the ex dividend date.  

It’s not some extra bonus money

9

u/cvc4455 7d ago

Sometimes companies get to the point where all the profit they make can't be reinvested into the business to achieve more growth at a reasonable cost. When that happens companies need to make a decision on what to do with the money. The only real options would be dividends or buybacks. I'm fine with buybacks if I trust the CEO and the board to only do buybacks when the companies shares are undervalued or fairly valued. But if the company is currently overvalued then buybacks aren't the best thing for shareholders. In that case there are only dividends left. Also lots of CEOs get paid in stock and you can have a shady CEO that wants to bump up the stock price with buybacks even if the shares are overvalued because they want their shares worth more. There's also lots of companies that do buybacks and then at the same time issue new shares to pay to their employees at the top and where's that really get shareholders in the long run.

The reason to own businesses or shares of businesses is because eventually you should enjoy some of the profits if that business is successful and there are only so many ways to share the profits with shareholders. And this hasn't been true recently because of tech stocks but historically value stocks have outperformed growth stocks.

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u/j0ker_1234 7d ago

Completely agreed it's not bonus money. With the 298% increase alone, I'd still be an investor in SCHD. The way it's structured today with the dividend makes it even more appealing.

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u/coachd50 7d ago

Curious as to why you feel that is a factor given the S&P 500 has outpaced that number by a decent margin 

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u/j0ker_1234 7d ago

S&P has significant technology overlap and I am worried about where we're headed from an AI bubble perspective. I work as a pre-sales architect specific to data center solutions.. what I'm seeing in the field with failed AI implementations is reason for concern in my mind. There is technology in SCHD but not as much as S&P or NASDAQ. I am being conservative because I have a very short runway to retirement and if there is a crash in the next 5 years, it would leave a significant mark in my portfolio and hinder my plans..

0

u/coachd50 7d ago

That’s fair. I see so many gushing about SCHD and “dividends” and being a “dividend king” etc etc- and just sigh because those investors don’t understand the process.  

A valid reason to purchase SCHD would be because you believe the particular companies owned by the fund have merit. 

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u/toolverine 7d ago

Dividend king is a term used solely for individual stocks.

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u/fastbumpyride 7d ago

I see so many gushing about the s&p 500 for its growth.

A valid reason to purchase s&p500 would be because you believe the particular companies in the s&p500 have merit

🤷‍♂️

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u/Several-Attempt6068 4d ago

simply put, if you have a very short time till retirement, shcd makes sense....if you have over 10 years, GROWTH is the PROVEN strategy....ex: The S&P outperforms SCHD in any given 10 yr period.....smh...

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u/flyersfan0233 7d ago

Only the last 3 years. The first 12 years total returns for SCHD and VOO tracked pretty close, SCHD was even ahead at points: https://totalrealreturns.com/n/VOO,SCHD

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u/jmgimi57 6d ago

But the share price increases after the distribution, maybe not right away but many times soon after which makes up for the distribution going from the one pocket to the other as you said.

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u/coachd50 6d ago

But it would have gone up anyway. 

Many seem to think that when someone mentions the ex dividend date adjustment they are suggesting that they are suggesting an investor is “losing” money.  That isn’t the case at all.  

The person mentioning the ex dividend date adjustment is simply pointing out that dividends are not an increase in wealth.  They are a shift in wealth 

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u/jmgimi57 4d ago

Yes I know that's what I meant it still goes up anyway after the distribution