Want Decades of Passive Income? Buy This Index Fund and Hold It Forever.

Core Viewpoint - The Schwab U.S. Dividend Equity ETF (SCHD) is highlighted as an attractive option for generating passive income through dividends while also offering potential for capital appreciation [2][5]. Group 1: Dividend Investing - Dividend-paying stocks have historically provided strong returns, with dividend growers and initiators averaging a total return of 10.24% from 1973 to 2024, compared to 4.31% for non-payers [4]. - The performance of dividend-paying stocks is attributed to the necessity for companies to maintain stable income to commit to regular dividend payments [4]. Group 2: Schwab U.S. Dividend Equity ETF Features - The Schwab U.S. Dividend Equity ETF offers a solid dividend yield of 3.9% and tracks the Dow Jones U.S. Dividend 100 Index, focusing on high-dividend-yielding stocks with a history of consistent dividend payments [6]. - The ETF has a low expense ratio of 0.06%, meaning an annual fee of $6 for every $10,000 invested, making it cost-effective for investors [6]. Group 3: Top Holdings - The ETF's top 10 holdings account for approximately 40% of its value, with significant dividend yields from companies like Altria Group (6.86%) and Verizon Communications (6.31%) [7]. - These holdings are expected to maintain or increase their dividend payouts as long as they remain financially healthy [7]. Group 4: Performance Comparison - Over the past 3, 5, and 10 years, the Schwab U.S. Dividend Equity ETF has shown average annual gains of 8.14%, 12.54%, and 11.39% respectively, which is lower than the Vanguard S&P 500 ETF's performance but offers higher income [8]. - Investors may consider allocating funds to both the Schwab ETF for income and the S&P 500 ETF for growth, as both can provide long-term passive income [8].