Schwab's SCHD ETF: A Popular Dividend Option with Poor Recent Performance

The Schwab U.S. Dividend Equity ETF (SCHD) has underperformed in the last year, prompting investors to explore alternative dividend ETFs. The CGDG Global Dividend ETF is presented as a potential option with income growth potential. It offers a diversified portfolio of international dividend-paying stocks, providing investors with a broad exposure to global dividend markets.

The Schwab U.S. Dividend Equity ETF (SCHD) has experienced poor performance over the last year, leading investors to seek alternative dividend ETFs. One promising contender is the Capital Group Dividend Growers ETF (CGDG), which offers a diversified portfolio of international dividend-paying stocks, providing investors with broad exposure to global dividend markets.

CGDG, launched in September 2023, has shown resilience despite its short operating history. Over the past 12 months, CGDG's price has increased by 17.84%, with a total return, including dividends, of 20.31%. The fund's expense ratio is 0.47%, making it slightly less cost-efficient than some alternatives. However, CGDG's strategy of focusing on companies with attractive dividend yields and growth potential has demonstrated its effectiveness [1].

CGDG's strategy involves maintaining exposure to companies with a high dividend yield and potential for future growth. The fund's asset allocation includes 46.1% in the United States, 30.6% in Europe, 14.1% in the Asia-Pacific region, and 4.7% in other regions. The top sectors include Industrials (17.2%), Financials (17.1%), and Information Technology (13.6%), with technology companies being a notable inclusion [1].

Notable holdings in CGDG include Broadcom (AVGO), Philip Morris (PM), Taiwan Semiconductor Manufacturing (TSM), and VICI Properties (VICI). These companies have demonstrated strong dividend growth and healthy financial metrics. Broadcom, for instance, has increased its dividend at a compound annual growth rate (CAGR) of 13.15% over the last five years [1].

While CGDG has outperformed some traditional index-tracking ETFs like the SPDR S&P 500 ETF (SPY) and the Invesco QQQ Trust (QQQ) since its inception, it has also shown vulnerabilities. Dividend ETFs tend to underperform over time compared to traditional ETFs due to their focus on income, potentially limiting growth. Additionally, CGDG's exposure to real estate holdings like VICI Properties and Welltower (WELL) can introduce sensitivity to interest rate environments [1].

CGDG's dividend yield currently stands at 1.9%, which is lower than some other dividend ETFs. However, the fund's short history and the potential for dividend growth among its holdings suggest that CGDG could become a competitive option for investors seeking income growth. Investors should consider their objectives and risk tolerance before choosing a dividend ETF, as each fund has its unique strategy and performance characteristics [1].

References:
[1] https://seekingalpha.com/article/4799774-cgdg-global-dividend-etf-income-growth-potential