Charles Schwab Dividend ETF: An Overview

Schwab US dividend equity ETF is worthy of consideration for income-seeking stock investors who look for investment quality and stability. There are 25 ETFs that are managed by Charles Schwab Investment Management that will truly help you in building the foundation of your portfolio.

What Are Dividend Charles Schwab ETFs?

Exchange-traded funds (ETFs) are a type of investment fund and they carry stocks that have a history of distributing dividends to their shareholders. It is important to note that ETFs do not guarantee dividend payments. However, they guarantee coupon payments on bonds.

Charles Schwab ETFs give clients access to a variety of exchange-traded funds from low-cost Schwab ETFs that are used as a good foundation for one’s portfolio to wider or broader ETF selections (other than Charles Schwab ETFs) that shall be used to further strengthen such portfolio.

What Are the Advantages and Disadvantages of Charles Schwab Dividend ETFs?

Charles Schwab dividend ETFs are known to generate cash flows which investors really look forward to. Many investors believe that a company’s performance is measured by its ability to generate returns or profits for shareholders in the form of dividends.

Before making any critical decision as regards your portfolio, it is imperative to know the common advantages and disadvantages of Charles Schwab dividend ETFs.

Advantages of Charles Schwab Dividend ETFs:

  • Charles Schwab Dividend ETFs provide portfolio diversification.
  • May generate a regular revenue income stream based on investing assets and stock funds.
  • Payouts may continue even when company earnings are down.
  • Charles Schwab Dividend Equity ETF can provide a stream of income and long-term growth. Schwab U.S. dividend ETF has low management fees, respectable total return, and high assets liquidity.

Disadvantages of Charles Schwab Dividend ETFs:

  • Future dividends are not guaranteed by Charles Schwab Dividend ETFs.
  • Charles Schwab investing funds yield may be offset by an unprecedented decline in the price of a stock.
  • Dividends and stock funds are taxed specifically during the year that shareholders expect to receive them.

What Are the Factors to Consider When Choosing Charles Schwab Dividend ETFs?

The high-yield or long-term growth potential of dividend ETFs is often used to characterize them. Schwab ETFs offer two different methodologies that can work well together. Hence, in choosing dividend ETFs, consider the following:

  • Dividend growth. The dividend growth strategy screens for companies that have a history of increasing dividends over time but may have a lower current yield.
  • High yield. High yield strategy screens for companies that have the highest current yield but may have unsustainable dividend payments over time. ETFs tend to give focus on how the company pays a dividend and how that yield is part of the portfolio.

Why You Need to Invest in Charles Schwab ETFs?

There are points of considerations that you should know on why you should finally invest in Schwab ETF:

1. Diversification

A Schwab US dividend equity ETF makes it possible for you to diversify your portfolio in the most efficient way possible because you will no longer have to select individual stocks or bonds.

Schwab ETFs offer you a broad selection as they cover most major asset classes.

In order to ensure that everyone gets to have access to ETFs, especially those sectors where it may be difficult to buy and sell individual stocks and bonds, there are international ETFs, regional ETFs, and ETFs for particular industries.

2. Low cost

  • The asset-weighted average operating expense ratios (OERs) for Schwab ETFs is only 0.05%.
  • These OERs for Schwab ETFs tend to be low which is usually lower than they are for actively managed mutual funds.
  • Another benefit from Schwab is that online ETF trade commissions are free of charge per trade.
  • Some of the costs most commonly associated with Schwab ETF are Operating expense ratio (OER), trade commissions date funds, bid/ask spreads, and services premiums.

3. Trading flexibility

One good thing about Schwab ETFs is their versatility as they allow you to easily move or transfer money between specific asset classes that may include stocks, bonds, and commodities. Schwab ETFs allow flexibility when it comes to trading them because just like stocks, you can trade ETFs anytime within market hours every single day.

4. Transparency

Many, if not all, ETFs are transparent about their holding on a day-to-day basis. Active semi-transparent ETFs disclose full portfolio holdings to investors either monthly or quarterly, with a lag.

A Schwab ETF typically holds the top securities as the specific index or benchmark they track, although some may hold a representative sample of the top index securities.

5. Tax efficiency

ETFs usually pass through fewer capital gains to investors because of lower turnover and the in-kind redemption process.

Why Is Charles Schwab the Best Dividend ETF to Invest in?

The following are the areas of considerations in choosing or determining the best dividend ETF:

1. Commissions

Just like any other exchange-traded security, commissions are paid at every buy and sell ETF transaction. As a consequence, these commissions will add up over time, and hence, they entail additional ETF cost on your part.

Remember, however, that not all brokers will be charging you such commission when you trade an ETF online. You have to check whether or not the commission is to be paid before trading.

Pro Tip: Schwab ETF has 0% online commissions.

2. Spreads

Apart from the commissions paid, investors would also have to pay the “spread” either in buying or selling ETF. This spread refers to the difference between the higher price paid to acquire a security and the lower price at which you can sell such security.

Remember that the wider the spread, the higher the cost.

3. Premiums and discounts

Unlike mutual funds that are bought and sold at net asset value (NAV), Charles Schwab ETF is bought and sold at market price. As a consequence, investors may pay more for Charles Schwab ETF than the value of underlying stocks or bonds. This is considered a premium.

On the other hand, investors may also sell Charles Schwab ETF for a value that is less than the value of its holdings. Such is considered as a discount.

4. General liquidity

Market makers affect Schwab ETF’s liquidity. Market makers refer to firms that standby to buy or sell an ETF at any given point in time.

The more interested market makers there are, the closer the highest and lowest offered prices to sell there will be. Likewise, ETFs with lower liquidity tend to have larger bid/ask spreads.

5. Market volatility

Market volatility leads to the widening of ETF bids. Hence, it is important to pay attention to market trends. Moreover, market volatility affects premiums or discounts of net asset values which may result in higher costs for the investor.

Final Thoughts

Take advantage of the expertise of Schwab in building a strong ETF portfolio. Schwab believes that your ETF investment will depend primarily on the type of investor that you are.  Charles Schwab upholds that financial transparency is a prerequisite to being in charge of one’s financial life. Such transparency will result in better investing performance as measured by better total returns. In learning a particular Schwab ETF (like the Schwab 1000 Index ETF) and other services, make sure to get detailed information about fees and expenses, risk, investment strategies, and investment policies on Schwab’s website.  For more financial articles and Pro Tips on how to get the best investments in the market today, read our financial articles here in Investoralist, and learn more about the best trade techniques today! 

Subscribe to Our Newsletters​

Stay Up to Date on Investment News
Delivered to You