SCHD Dividend ETF: 11.5% CAGR & Latest Payout Hike

In the landscape of investment strategies, dividend growth investing stands apart for its ability to build lasting wealth through a dual mechanism of reliable income and compounding growth. Unlike speculative bets on volatile growth stocks, this approach focuses on established companies with a proven history of consistently raising their shareholder payouts. The strategy delivers a powerful snowball effect: as these firms mature and generate increasing cash flow, they reward investors with higher dividends, which in turn can be reinvested to purchase more shares. This creates a virtuous cycle where income accelerates, often outpacing inflation and enhancing an investor’s purchasing power over time.

This method is particularly valuable for both retirees seeking stable income and younger savers building long-term nest eggs. It prioritizes business quality over market speculation, favoring companies with strong balance sheets, sustainable competitive advantages, and track records of financial discipline. When dividends are reinvested within tax-advantaged accounts like IRAs, the compounding effect can account for a substantial portion of total returns over decades. The Schwab US Dividend Equity ETF (SCHD) has become a flagship vehicle for executing this strategy, offering investors a low-cost, diversified entry point into this wealth-building approach.

SCHD’s performance metrics underscore its status as a dividend growth powerhouse. Since its inception in 2011, the ETF has achieved an impressive 11.5% compound annual growth rate (CAGR) in its dividends. More recently, this momentum has accelerated, with the dividend CAGR exceeding 13% since 2018. This consistent growth is not merely a historical artifact; the fund just announced another quarterly dividend increase to $0.26 per share, up from $0.25 a year ago—a modest but meaningful 3.5% raise that aligns with its philosophy of sustainable growth.

The year-to-date picture is even brighter, with total payouts up approximately 5% compared to the same period in 2024. With one more distribution scheduled for December 2025, the full-year growth rate could climb higher. SCHD’s historical performance highlights its dynamism: over the past four years, it has delivered annual dividend increases exceeding 14% in three of them, including standout years like 2021 (17.6%) and 2022 (15.1%). This record demonstrates the ETF’s engineering for long-term compounding rather than short-term market fluctuations, making it a compelling choice for patient investors.

What truly differentiates SCHD is its rigorous, rules-based methodology. The ETF tracks the Dow Jones U.S. Dividend 100 Index, which selects U.S. companies based on a stringent set of criteria. A primary requirement is at least ten consecutive years of dividend increases, ensuring a focus on management commitment to returning capital to shareholders. The selection process then equally weights four key financial health metrics: cash flow to total debt, return on equity, dividend yield, and five-year dividend growth rate. This balanced approach prevents over-reliance on any single factor, blending yield attractiveness with sustainability.

This disciplined process results in a portfolio of high-quality, financially sound companies. Current top holdings include AbbVie (ABBV), Amgen (AMGN), and Home Depot (HD), which represent sectors like healthcare and consumer staples known for their stability and cash-flow generation. The methodology is dynamic; as stock prices rise and yields compress, the index systematically rebalances, removing companies that no longer meet its high-yield profile. This ensures the portfolio maintains its income-focused character, currently yielding 3.76%—significantly above the S&P 500’s average. By prioritizing quality and income over speculative growth, SCHD offers a resilient strategy that performs consistently across market cycles.

For investors seeking to harness the power of compounding, SCHD presents a compelling case. Its ultra-low expense ratio of 0.06% ensures that more of the returns compound for the investor’s benefit. The strategy of reinvesting dividends is particularly powerful within this framework; each payout automatically purchases more shares, which then generate their own dividends, creating a self-sustaining cycle of growth without requiring additional capital injection. Over time, this can transform a modest initial investment into a significant income-generating asset.

SCHD’s focus on companies with a decade-long history of dividend growth provides a built-in quality screen, reducing exposure to firms that might cut payouts during economic downturns. This makes the ETF a valuable component for any portfolio, from aggressive growth strategies seeking stability to conservative income-focused plans. In a market often captivated by the allure of tech glamour, SCHD offers a disciplined, proven path to wealth accumulation through the quiet, relentless power of rising dividends. Its latest payout hike is not just a quarterly event but another confirmation of its role as a cornerstone for enduring financial success.