Quick Read Schwab Dividend ETF (SCHD) surged 13.6% year-to-date on rotation from growth to its 100 value stocks. Vanguard International Dividend ETF (VYMI) gained 39% over the past year as the dollar fell. iShares Treasury ETF (TLT) surged from $90 to above $120 during the Great Recession as a recession hedge. The analyst who called NVIDIA in 2010 just named his top 10 AI stocks. Get them here FREE. We're looking at a surge of retirees in the 2020s due to the Baby Boom's peak in the 1960s, turni ...

Core Insights - The article emphasizes that high yields can be misleading if not supported by strong underlying fundamentals, highlighting the difference between sustainable income and yield traps [1][2][3] Group 1: Yield Traps and Market Trends - The concept of a yield trap is introduced, where high-yielding stocks often have deteriorating fundamentals and unsustainable payout ratios, leading to further stock price declines when dividends are cut [2] - In 2025, many popular income products were not traditional dividend funds but rather high-yield products and leveraged ETFs that appeared attractive but often failed to deliver reliable income [5] - The market is shifting towards prioritizing income reliability over raw yield, as investors are increasingly focused on the sustainability of income rather than just the yield percentage [4][10] Group 2: Characteristics of Reliable Income - Reliable income is characterized by strong business fundamentals, including robust free cash flow, low payout ratios, and a history of maintaining or increasing dividends, especially during downturns [6] - Companies like Procter & Gamble and Johnson & Johnson are cited as examples of firms with long histories of dividend increases, making them attractive for income-focused investors [6] Group 3: ETF Strategies and Income Portfolios - ETFs like the Vanguard Dividend Appreciation ETF focus on companies with a history of dividend growth, offering modest yields but strong growth potential and quality metrics [7] - The article suggests that resilient income portfolios in 2026 will be built around a core of dividend-growth ETFs, complemented by other income-generating strategies like covered call funds and bond allocations [11][12] Group 4: Market Conditions Favoring Income Reliability - The current market conditions, including rate cuts and declining money market yields, are making income reliability more valuable, as speculative income strategies become riskier [8] - A defensive rotation towards utilities and consumer staples indicates a shift in capital towards companies with stable earnings and predictable cash flows, benefiting dividend-growth stocks [9] Group 5: Investor Mindset Shift - The article concludes that the shift from chasing high yields to seeking reliable income reflects a maturation in investor thinking, where income is viewed as a dependable paycheck rather than just a number to maximize [14]

Join for a 100% Risk-Free trial and see if our proven method can help you too. You do not need to pay for the costly lessons from the market itself.I last analyzed the Schwab US Dividend Equity ETF ( SCHD ) on January 15, with an article entitled “SCHD Vs. SPY: Rotation To Value Is Gaining Momentum.” The article was triggered by the divergence I observedSensor Unlimited is an economist by training with a PhD, with a focus on financial economics. She is a quantitative modeler and for the past decade she has ...

Core Viewpoint - The Schwab US Dividend Equity ETF (SCHD) has experienced a period of underperformance, leading investors to shift their focus to more successful alternatives like the Vanguard Dividend Appreciation Index Fund ETF (VIG) [1] Group 1 - The Schwab US Dividend Equity ETF (SCHD) has been going through a dry spell for the past couple of years [1] - Investors have taken the opportunity to move into hotter names such as the Vanguard Dividend Appreciation Index Fund ETF (VIG) [1]

Economic Overview - The U.S. economy is described as "K-shaped," where wealthier Americans benefit from a strong stock market, while poorer consumers face challenges due to a weak labor market and high inflation [1] - Consumer spending, which constitutes about 70% of U.S. GDP, is at risk of declining, potentially leading to a sharp deceleration in economic growth by 2026 [2] Investment Opportunities - The Schwab US Dividend Equity ETF (SCHD) may outperform the stock market significantly if negative economic scenarios unfold, as it offers a sizeable dividend yield that could attract investors during market downturns [2] - SCHD's large investments in sectors such as energy, healthcare, and industrials position it well for strong performance in 2026, regardless of broader market conditions [3] ETF Holdings - Nearly 37% of SCHD's holdings are in consumer defensive or healthcare stocks, which are typically resilient during economic downturns [4] - Key holdings include major pharmaceutical companies like AbbVie, Amgen, Pfizer, and Bristol Myers, as well as consumer staples like Coca-Cola and PepsiCo [4] Interest Rate Impact - Economic downturns often lead the Federal Reserve to lower interest rates, which could further benefit SCHD, especially if rates drop significantly [5] - The potential nomination of a Fed chair who supports aggressive rate cuts could enhance SCHD's attractiveness due to its 3.73% dividend yield [5]

Core Insights - Investing in high-dividend yield ETFs can enhance portfolio diversification and provide steady income, appealing to long-term investors and those nearing retirement [1][2] - Quality high-yield ETFs typically consist of mature and financially stable companies, making them attractive for wealth compounding through reinvested dividends [2] Group 1: SPDR Portfolio S&P 500 High Dividend ETF - The SPDR Portfolio S&P 500 High Dividend ETF (SPYD) tracks the top 80 high-dividend-yielding companies in the S&P 500, trading at approximately $43 per share with a trailing 12-month dividend yield of about 4.5% [4][5] - The ETF has a low expense ratio of 0.07%, meaning a $10,000 investment incurs only $7 in annual fees, and it currently manages over $7.3 billion in net assets [4][5] - The fund's top sector exposures include real estate (21.4%), utilities (13.4%), financials (17.3%), and consumer staples (16.3%), with minimal tech sector exposure of less than 2% [5][6] - Since its inception in 2015, the ETF has delivered a total return of about 130%, significantly lower than the S&P 500's over 300% return in the same period [6] Group 2: Schwab US Dividend Equity ETF - The Schwab US Dividend Equity ETF (SCHD) trades around $28 per share with a yield of approximately 3.8%, aiming to mirror the Dow Jones U.S. Dividend 100 Index [9][10] - The ETF focuses on companies with strong balance sheets and consistent dividend payments, holding around 100 stocks, including major names like Bristol Myers Squibb and Coca-Cola [10][12] - With an expense ratio of 0.06%, the fund has nearly $73 billion in assets under management and has delivered a total return of over 200% over the last decade, translating to an annualized return of about 11% to 12% [12][13]

Core Insights - The article emphasizes the importance of effective investment strategies for retirement savings, particularly aiming for a target of $1 million, while balancing risk appropriately [1][5]. Investment Strategies - It is recommended to consider investing in index funds for long-term savings, as they simplify the investment process by eliminating the need for constant stock analysis and trading decisions [2][5]. - Index funds can help investors target growth, income, or both, and diversifying across several funds is advised [5]. Growth Potential - Historical data indicates that the stock market has averaged annual returns of nearly 10% over several decades, with potential variations during individual investment periods [4]. - A table illustrates how monthly investments of $1,000 can grow over time at different annual growth rates (8%, 10%, and 12%), showing significant potential for wealth accumulation over 40 years [4]. Index Fund Recommendations - The article lists nine promising index funds in ETF form, highlighting their recent dividend yields and average annual returns over 5, 10, and 15 years [6][7]. - Notable ETFs include: - Vanguard S&P 500 ETF (VOO) with a 5-year average return of 14.91% and a recent dividend yield of 1.12% - Vanguard Total Stock Market ETF (VTI) with a 5-year average return of 13.69% and a recent dividend yield of 1.11% - VanEck Semiconductor ETF (SMH) with a 5-year average return of 28.96% and a recent dividend yield of 0.30% [7].

Core Insights - The Schwab US Dividend Equity ETF (SCHD) is popular due to its combination of long-term capital returns and a sustainable dividend yield close to 4% [1] - However, there are monthly dividend ETFs that have outperformed SCHD, suggesting income investors may benefit from diversifying their portfolios [2] - SCHD has declined by 2.98% over the past year, primarily due to limited exposure to the tech sector, while other ETFs have provided better returns [3] ETF Comparisons - The Amplify CWP Enhanced Dividend Income ETF (DIVO) is noted for outperforming SCHD by utilizing a strategy that combines high-quality large-cap investments with covered call options [4] - DIVO currently offers a dividend yield of 4.55% and has an expense ratio of 0.56%, with returns of 12.18% over the past year compared to SCHD's 0.33% [5][6] - The NEOS Nasdaq-100 High Income ETF (QQQI) provides a higher yield of 13.6% and has returned 21.8% over the past year, indicating strong competition in the dividend ETF space [7]

Core Insights - The article emphasizes the growing popularity of monthly dividend ETFs among everyday investors, highlighting their ability to provide predictable income similar to a regular paycheck [4][5][13] - Monthly income ETFs are positioned as a financial tool that can help investors manage their day-to-day expenses, offering a sense of stability in volatile markets [2][3][13] Group 1: Benefits of Monthly Income ETFs - Monthly dividend ETFs allow investors to gain exposure to a diversified portfolio of companies, bonds, or sectors through a single ticker, reducing the need for individual stock selection [1] - Regular deposits from monthly ETFs can alleviate anxiety associated with market instability and reduce emotional trading behaviors like panic selling [2] - The predictability of income from monthly ETFs aligns well with common monthly expenses such as rent, utilities, and other bills, making them an attractive option for financial planning [3] Group 2: Investment Strategies and Options - Covered call strategies, such as those used by JPMorgan's Equity Premium Income ETF (JEPI), generate recurring premiums and offer an 8.16% dividend yield, translating to approximately $370 monthly for 1,000 shares [7] - The Vanguard Total Corporate Bond ETF (VTC) provides a monthly dividend of $0.30 with a 4.74% yield, appealing to investors as interest rates decline [8] - The NEO Nasdaq 100 High Income ETF (QQQI) employs an options strategy to deliver around $0.63 per share monthly, resulting in about $630 for 1,000 shares [9] Group 3: Combining Investment Approaches - Investors can create a staggered income approach by combining monthly ETFs with traditional quarterly dividend ETFs, ensuring consistent monthly cash flow [10] - The Schwab US Dividend Equity ETF (SCHD) pays out $0.26 quarterly, which can be integrated into a monthly income strategy [10] Group 4: Considerations for Investors - While high yields are attractive, investors must ensure that payouts are supported by real cash flow, as reliance on options premiums can lead to fluctuations during market volatility [11] - Total return is a critical factor, as some monthly ETFs may trade off growth potential for immediate income, which is important for income-focused investors to recognize [12] - Tax implications are significant, as many monthly distributions are taxed as ordinary income, which may affect overall returns [12]

Core Insights - Retirees face a choice between high-yield dividend ETFs like JPMorgan Equity Premium Income ETF (JEPI) and long-term growth options like Schwab US Dividend Equity ETF (SCHD) [3][4] Group 1: JPMorgan Equity Premium Income ETF (JEPI) - JEPI offers a high dividend yield of 8.16%, providing significant annual income for investors [5][9] - The ETF invests in defensive, lower-volatility stocks and sells out-of-the-money call options on the S&P 500 Index, using Equity Linked Notes (ELNs) [7][9] - While JEPI provides both yield and upside potential, it has capped upside and limited downside protection, making it perform well in bullish market conditions [8][9] Group 2: Schwab US Dividend Equity ETF (SCHD) - SCHD yields 3.77% with a low expense ratio of 0.06% and offers uncapped upside potential [9] - The ETF has experienced a 4% decline over the past year but provides predictable downside protection [9]