This High-Yield ETF Has Increased Payouts 13 Years Straight -- and It's Still Undervalued

Core Viewpoint - The Schwab U.S. Dividend Equity ETF (SCHD) has consistently increased its dividend payments annually since its inception, making it a strong option for investors seeking reliable income [1][3]. Dividend Growth Strategy - SCHD employs a targeted stock selection process, requiring stocks to have at least 10 consecutive years of dividend payments to be considered for its portfolio [5]. - Stocks are further screened based on four criteria: return on equity (ROE), cash-flow-to-debt ratio, dividend yield, and five-year dividend growth rate, with the top 100 stocks forming the final portfolio [6]. Dividend History - SCHD has shown a consistent increase in annual dividends since its launch in October 2011, with the most recent payout in 2024 being $0.9944 per share [8][9]. - The fund has paid out $0.7694 per share through the first three quarters of 2025, and if the fourth-quarter dividend is $0.23 or more, it will mark 14 consecutive years of dividend growth [9]. Portfolio Composition - The ETF's portfolio consists of durable, mature cash-flow generating companies, with top sector holdings in energy (19.3%), consumer staples (18.5%), healthcare (16.1%), industrials (12.3%), and financials (9.4%) [10]. - Major holdings include Merck, Amgen, Cisco Systems, AbbVie, and Coca-Cola, which are not high-growth tech stocks but provide steady income [11]. Market Position - SCHD currently trades at a price-to-earnings (P/E) ratio of 16.7, significantly lower than the S&P 500's 25, suggesting potential downside protection in market downturns [12]. - The fund offers a current yield of 3.8%, which is over three times that of the S&P 500, and has a low expense ratio of 0.06%, making it an attractive option for dividend-seeking investors [13].