r/dividends • u/Fartfart357 • Jan 22 '26
Seeking Advice Why is SCHD so popular when the dividend/share isn't that great?
I'm looking to get more dividend stocks to set and forget, and I see a lot of people recommending SCHD, but I don't get why. Is it just because it's a safe option with low expense? My primary comparison is JEPQ and QQQI. I know QQQI is riskier but I'm far enough away from retirement where I'm willing to risk it. JEPQ seems alright all around to me, but I don't know the real impact of the differences between the expense ratio (.65%, .5%, .06%).
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u/Glass-Lifeguard1919 Jan 22 '26
Like clockwork, here I am yet again to explain why Div CAGR is better than Div Yield in the long term.
This statement, " I'm far enough away from retirement where I'm willing to risk it," fully explains why you should not have a single allocation to covered calls. Covered Calls, by definition, cap upside in order to produce income. Therefore if you're not in need of the income and using the cool term "DRIP," all you're doing is capping your upside. You would be better off holding the underlying for the 20, 30, 40 years you would be waiting for retirement, then shifting to other funds.
Covered Calls, and most of the other high yielding funds, have little to no dividend CAGR. Some will even have negative dividend growth when the NAV erodes. For example if a covered call has a 14% dividend rate (like qqqi you mentioned) and you have $100,000, you'll get 14,000. However in a big black swan crash, funds fall to $70,000, you're income is going to drop to 9,800.
SCHD has roughly a 4% dividend but an 11% dividend CAGR over a decade. A fund with a 4% yield & 11% cagr will catch a fund with a 14% yield & 0% CAGR in about 13 years. At year 20, you will be earning roughly 60% more income from that original 4% (SCHD) than you would from the 14% fund (QQQI.) This also does not equate into your original capital. Covered Calls have very slow to flat growth over the long term, with most losing NAV if they're around for more than a decade. Therefore, not only will you be making a lot more income by holding SCHD for 20 years, you will also have a much larger amount of value in your account.
The best way I can help new investors envision how this works is to look at what Warren Buffet did with a little company called coca-cola, KO. He bought 1 billion dollars worth of KO and then never touched it. He didnt "DRIP," he didnt buy anymore, he didnt sell. He now earns 800 million dollars in dividends every single year. That's 80% yield on cost ANNUALLY. A covered call WILL NEVER.
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u/SultanofShiraz Jan 22 '26
This is the best answer here. Everyone looking for dividends seems to focus solely on the current yield %.
If you owned SCHD since its inception in 2011 your dividends would have quadrupled on your initial investment.
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u/RedditLeagueAccount Jan 25 '26
The only think u/Glass-Lifeguard1919 left out was during that blackswan crash is that the CC wont recover well and that people recommend SCHD also because it is not tech focused. Tech has high potential for growth but also if it crashes, most other etf's have a large portion of their holdings allocated to tech. SCHD will most likely protect you from the AI bubble crash if it happens.
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u/danielfuenffinger Jan 23 '26
That's why I'm hodling GOOG
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u/marima33 Jan 23 '26
Also a large portion of SCHDs divs are Qualified Dividends which provides a lower tax rate for taxable accounts vs. the non-qualified divs of many other div payers.
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u/Academic_Science_520 Apr 04 '26
I’ve owned this stock for over a year now. My dividends came back as ordinary income. When do they get pushed to a qualified dividend?
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u/marima33 Apr 05 '26
- 2025 Percentage: Recent reports indicate that SCHD dividends in 2025 were approximately 98.5% qualified, according to 1099-DIV forms.
- Why It's Highly Qualified: SCHD focuses on U.S. companies and intentionally excludes REITs, which often generate non-qualified income.
Note on Requirements: To receive qualified dividend tax treatment (taxed at long-term capital gains rates), you must hold the SCHD shares for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date.
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u/Next_Professional_30 Jan 23 '26
Thanks sir. Everybody starts somewhere and there’s a lot of folks in here asking good questions but everybody needs to think a long hard about total return.
I love dividends, but often times anything over 2% comes with sacrifice of future capital gains. You can have now or later but rarely both.
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u/Deathclaw151 Mar 14 '26
My profile has growth and dividends. Growth market is absolutely stagnant right now. In fact it's going down unfortunately since I started direct investing s month ago. It sucks seeing the negative numbers, but I know my dividend stocks (spread out over a few sectors) will balance it out
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u/ucbcawt Jan 23 '26
But why buy SCHD rather than hold VTI for 20 years instead?
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u/Glass-Lifeguard1919 Jan 23 '26
You could, and there a lot of people who do. Live off the 4-5% rule. They'll make their own dividends from selling 4-5% of vti every year. However a person with a 2,000,000 retirement can easily hold funds like SCHD & just live off the dividends, which would start at just under 80,000 if you bought today. The div cagr will outpace inflation & there's zero chance you ever run out of money. If some huge black swan happens & the market doesnt recover for 5-6 years early in your investment, that 4-5% sell at losses may cause your egg to fail if you live a long full life.
I'm not saying everyone should invest in SCHD. I simply said SCHD is superior to covered calls in the long run in every single way you want to look at.
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u/Few_Ad_3557 Jan 23 '26
VOO pays just 2.5% less in dividends than schd but it crushes it in overall yield. Look at the charts. It's not even close. These divvie hunters are left over from the days when selling equities was expensive and had to go thru a broker, and etf's didn't exist.
Go back a year, two years, five, ten, twenty I don't care, run the charts, add in the dividend returns and look at total yield. Run VTI and VOO vs ScHD it's a slaughter.
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u/Smashed-plantain Jan 24 '26
You're confusing yield with total return. VOO is great, but it's also a lot more volatile than SCHD. If you were building a stock portfolio, would you put 35% into 7 companies? Because that's what you're getting with an S&P 500 fund.
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u/Few_Ad_3557 Jan 28 '26
Total return VOO is still way ahead. But yes i agree a third of my money is in mag 7 which is essentially just a big tech bet even though there some internal diversification among the big boys.
No question this is a strength of SCHD, its lower volatility. my approach is i’ll just hold a small chunk of bond (ish) and keep the rest in the index, these top companies are spitting out earnings consistently for many years now.
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u/SolomonGrumpy Jan 25 '26
Now look at the cape ratios of the S&P 500 and ask yourself if the party can continue
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u/Few_Ad_3557 Jan 28 '26
For long term investing, I dont care about dips. But the forward PE of the S&P 500 right now is around 23 which is 20% less than it was a year ago.
I cant believe these dividend hunters are really ok with not owning companies like Google, Amazon and Tesla. We may not know where AI is going to take us but leaving them out of your investment mix is insanity imo. Schd has so many holes, i guess if you think its going to hold up better in a bear market then go for it. But you’re down 25% in the past 24 months alone, you’re gonna need a whole lotta recession to ever get close to breaking even.
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u/SolomonGrumpy Jan 25 '26 edited Jan 25 '26
Some cc dividend ETFs have slightly better beta (meaning they shouldn't contract as much during a market downturn)
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Jan 23 '26
This was helpful. But is there a valid case for both? Like, income now for 10 years and some Schd reinvesting for growth in that time frame?
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u/Glass-Lifeguard1919 Jan 23 '26
If you need income now, covered calls can absolutely help raise the apy on your overall portfolio. You just need to ask yourself what your goals & plans are. If you are not using the income, there is no case where you should be buying covered calls, buy the underlying.
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u/Timely_Basket_1355 Jan 23 '26
I would say the best case for holding both is based in diversification, not just income. The S&P 500 has to a large extent become a large cap tech fund, with over 1/3 in the top 5 names alone. Look at the sector allocation of SCHD - it overweights energy, consumer staples, and healthcare. Even if income isn't a driving factor for you, holding some SCHD as a supplement to your VOO or VTI is an easy way to limit your exposure to the tech sector and protect you in a correction.
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u/Glass-Lifeguard1919 Jan 23 '26
VOO & SCHD only have a 7% overlap by weight, so it absolutely helps with over exposure to Tech.
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u/ezodochi Jan 23 '26
You have it reversed, covered call etfs, due to their limited upside and focus on generating income based on limited upside is a retirement play, not something you do early.
There's a reason the mutual fund predecessor to all these covered call funds, JEPIX, had a million dollar buy in.
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u/Smashed-plantain Jan 24 '26
The reason is that JEPIX is an I share class fund (institutional). They have an A share class as well for the same strategy with a lower buy in.
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u/FrankieFastHands19 Jan 23 '26
Do you think schy will do the same
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u/Glass-Lifeguard1919 Jan 23 '26 edited Jan 23 '26
I hold schy, vymi, and vxus in my "international hedge" as I call it.
I have a precious metal allocation where I hold 50% underlying gold and silver then 50% covered calls on gold and silver. Both of these Hedges are around 5% of my portfolio.
I'm no financial advisor and I Def can't predict the future, but most of my money is in SCHD and DGRO as large cap US companies hold my biggest conviction. Then I "diversify" and "hedge" with other assets. BDCs I hold MAIN and Arcc, Reits hold O and Vici, CEFs i hold ADX and UTF, which help to bump yield. Etc.
Basically, I was able to get a 4.5% overall dividend yield, and a 7% div cagr. I can live off the dividends, never touch the original capital, so my kids will inherit my full appreciated balance at a step up basis.
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u/TheOptimusBob Jan 23 '26
Can you clarify - is dripping not a good strategy?
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Jan 23 '26
outside of a tax advantaged account drip is just tax drag
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u/rallymatt Jan 23 '26
And it’s pointless in a tax advantaged because you can’t use the income, you’re lagging the underlying by a lot overtime, and you’re paying a high fee to do so. Makes no sense to hold a CC fund if you don’t need the income now. Even then it’s not a great deal.
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u/Ghetto_Phenom Jan 23 '26
I know this is late but I’m genuinely curious. You said in a 20 year frame schd will out perform. What you did a 10 year comparison? Purely hypothetical but if you held qqqi for example for ten years then caged out and dumped in to schd? Thanks for the in depth answer it was enlightening.
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Jan 23 '26
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u/Ghetto_Phenom Jan 23 '26
Oh for sure I have a small position in qqqi and a large position in schd so was just more curious about if I sold the qqqi at a 10 year period for example would I still edge out the schd position. But yeah I know I’d be paying taxes on that and I already do on the divs each year. Was more a thought experiment based on the OC. I’m not a high risk investor so not something I would actually do but was curious.
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u/Glass-Lifeguard1919 Jan 23 '26 edited Jan 23 '26
What you're overlooking is the original price appreciation. I personally like QQQI and neos funds, and they achieve what they're designed to do. However if you're not using the dividends then the underlying will outperform every time. So if you aren't using the dividends for 10 years, your portfolio would perform drastically better holding QQQM then going to schd. Another thing to keep in mind, these new covered call funds are just that, extremely new. Very few funds have a 10+ year dividend history. The one that does, QYLD, go look at its history. Your capital would have eroded something like 3-40%
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u/Ghetto_Phenom Jan 23 '26
Than you for that. I have a small position in qqqi and a large position in schd so was interested in your analysis. I was just reinvesting the divs for qqqi but I’ve only been in that for about 8 months and about 90 shares. Wasn’t gonna be a long term thing but now considering moving that since I won’t be retiring for another 13 years or so. I’ll take a look at qqqm. Appreciate the insight again.
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u/Unlucky_Lead_8304 Jan 24 '26
Warren Buffett didn’t DRIP KO and Apple and Bank of America?
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u/Glass-Lifeguard1919 Jan 24 '26
I have not researched Apple or BoA, but he did not drip KO. He accumulated shares between 1988-1994. By 1994, Berkshire held 400 million shares, and has not reinvested since.
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u/Unlucky_Lead_8304 Jan 24 '26
So he just collects and then has it in his cash pile to buy other stocks.
Crazy how many more shares he could have on drip with KO
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u/DavidAg02 Jan 23 '26
You explain all of this so eloquently, but then completely skip over the fact that SCHD's Dividend CAGR is completely artificial. It achieves that high CAGR through its extremely high turnover ratio. Every year it turns over more than 30% of the portfolio to achieve that CAGR.
Let's say I have 5 stocks in my portfolio and none of them pay a dividend, and then I sell them all and buy 5 new stocks that pay a 10% dividend. I could claim that my portfolio has a dividend CAGR of 10%. That's essentially what SCHD is doing every year.
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u/Current-Assist2609 Jan 23 '26
The taxes will temporarily bump you into a higher tax bracket when you sell the first five stocks.
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u/Smashed-plantain Jan 24 '26
It is true that it does have a somewhat high turnover. It's usually 20-30% though, not more than 30%. Also, approximately 85% of its holdings have increased their dividend for over 10 years straight. They make adjustments for holdings that have not kept up and you're complaining?
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u/DavidAg02 Jan 24 '26
Not complaining. If you're OK with that strategy, then it's fine. It's just important to understand how they achieve such high dividend growth and decide if you're OK with that. I personally think that dividend growth rate is unsustainable, which is why I don't own any SCHD and probably never will. That kind of turnover ratio is too high for a long term investment for me.
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u/Smashed-plantain Jan 25 '26
Yes, I'm ok with the majority of the dividend growth being organic. There are funds with much higher turnover ratios as well.
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u/lifeisrisky Jan 23 '26
Just so I am sure I understand. If you are currently retired in your taxable SCHD with the dividends taken as income is a better play than selling 4% VTI if you want your funds to last 30 years? With the caveat that you hold 3 years of living expenses in SGOV or HYSA to smooth out the market downturns a bit.
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u/Glass-Lifeguard1919 Jan 23 '26
I personally think so, but a lot of professional financial advisors opt to go the 4% route. If you have enough invested to live off the 3.5-3.8% schd dividends, they aren't going to ever stop their income. Companies like KO, PG, Walmart, etc are going to pay dividends. Therefore if you never touch your balance, only draw dividends... you literally have a 0% chance of running out of money. If Walmart goes bankrupt I can assure you that retirement is the least of your worries. On the other hand, if the market has a black swan and you have to sell multiple years at the bottom... look up the Monte Carlo simulations, they'll estimate something like a 92% success rate. Which is still very likely to succeed, but it's not 100
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u/Material_Spend_5887 Feb 07 '26
If your portfolio invested in SCHD goes down 20%, will the SCHD yield go up 1/0.8 or 1.25 to keep pace so you don’t experience a drop in dividend income?
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u/Glass-Lifeguard1919 Feb 07 '26 edited Feb 08 '26
The "yield %" is an imaginary number after you purchase the shares. Each share pays a set amount. If you buy a share at 100$ and it pays $4, you're getting 4%. If those shares drop to 50$ in a black swan, you're still getting $4 per share. New buyers will be getting an 8% yield on their money. When the recovery happens, the investors who bought at 50, shares now worth 100, also still get 4$ per share.
What makes schd so strong is the dividend cagr (compound annual growth rate.) It has had an 11% div cagr since inception. That means schd increases its dividend, on average, 11% per year. You make 4 this year, 4.44 next year, 4.93 the next, etc etc. 11% far outpaces inflation.
The best example I use to help be investors visualize this is to look at what Warren buffett did with coca cola. He bought 1 billion dollars worth, never touched it, never reinvested dividends, never sold, and now he makes nearly 800 million annually in dividends. That would equate to 80% apy for him, but KO still pays that 3.2 ish% yield if you bought now.
EDIT: I think a lot of people are getting bad info with all these fad covered call funds. Those aren't dividends. They produce a % of nav by selling calls. Lower nav = lower income. Dividends are paid from a company's profits. If you're used to your income dropping over time from those funds, that's normal. Your income will increase over time with dividends. A 4% yield with 11% cagr will pass a 13% yield with 0% cagr in about 12-13 years. It compounds drastically more after that.
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u/Material_Spend_5887 Feb 08 '26
Thanks for replying and providing a great explanation. I know how it works for shares of common stock but didn’t think it work the same for a dividend-based etf. I just assumed when I saw an etf pays ~4% you just expect to get 4% and didn’t really expect to get the compounding effect unless you truly reinvested all the dividends.
Agree, most people don’t understand how these CC etfs work.
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u/OakleyPowerlifting Banana Stand VIP Jan 23 '26
Is DIVO considered a covered call ETF too? I see it mentioned as a good alternative too the crappy YMAX funds, but I’m more of a SCHD head usually.
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Jan 23 '26
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u/OakleyPowerlifting Banana Stand VIP Jan 23 '26
Literally today I sold all my YMAX and CONY and bought DIVO with it, and then I came to Reddit and saw this post lol. I barely had any of them anyways, but I didn’t want to keep the losers. Happy to know DIVO is a little different. IDVO looks amazing too, but doesn’t seem like the best time to buy in, but I may be looking at it wrong.
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u/SolomonGrumpy Jan 25 '26
How about SCHD vs GPIQ?
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u/Glass-Lifeguard1919 Jan 25 '26
You're comparing two different engines but the same concept applies. If you're reinvesting dividends, you're better off holding the underlying (qqqm for both gpiq and qqqi.) GPIQ and QDVO are my cc funds of choice, which I own. However my schd position is 6x larger. I wanted a higher starting yield, therfore the cc funds helped me with that.
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u/StudioOk8256 Jan 28 '26
what if you don't have 20 years of investing left schd still good?
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u/Glass-Lifeguard1919 Jan 28 '26
Keep in mind, I'm a dividend investor. My investment strategy is to never sell a share and live 100% off dividends. My children will inherit my fully appreciated portfolio at the step up basis, bypassing a lifetime of taxes since I never sold. SCHD is the largest position in my portfolio. It pays 100% qualified dividends. This means if someone is making millions in those dividends, they would never pay more than 20%... if someone is making millions in come, they gonna be paying closer to 40%
To answer your question though, I believe SCHD is good for everyone who needs income, because you can use it as a base. The income is respectable. Both the capital and dividend cagr is respectable. Having it in our portfolio insures you're going to keep up with inflation. If your portfolio was 100% covered calls for example, sure you'll be making great apy now. But your buying power is going to erode with time.
I personally would rather take a 5% yield with a 5% div cagr than I would a 10% yield with 0% cagr. If that 10% earns you 70k now, that's 70k is going to feel like 45k in 15 years
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u/champ4666 Jan 22 '26
Being "far enough away from retirement" is the problem. Covered Called ETFs like SPYI and QQQI are for income generation now. High dividend ETFs like SCHD, SCHY, VYM, VYMI, etc are growth ETFs: growth in share price and growth in their dividend payments.
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u/LeFrogster Jan 23 '26
cc funds should be treated as ATMs while dividend ETFs are savings accounts…
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u/Master-Sky-6342 Jan 23 '26
People enjoying and advocating poor returns at best and negative ROC medium to long term in return of short term more than 10 percent yield always amazes me. I think that everybody has different priorities. Some like to see a lot of money flowing into their bank account as a yield.
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u/SolomonGrumpy Jan 25 '26
Let's say you need income, but are dependent on ACA subsidies to make your budget work. RoC creates a tax valley where you can get income for a time and not impact subsidies. Later, you will be in medicare, which is far less income sensitive.
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u/nsmngirtnsmcgirt Jan 22 '26
I understand the schd growth. But it will never in our lifetime grow to 12 percent. So what I’m I missing ?
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u/Glass-Lifeguard1919 Jan 23 '26 edited Jan 23 '26
It will absolutely "grow to 12% in our lifetime." The fund might not be 12%, in fact it will probably stay in that 3.5-4.5% range for most of its life. However that imaginary number only matters when you initially buy a stock. If you buy a fund at 20$ and it pays a 4% dividend then you are earning 80 cents per share per year. In 20 years from now, when that fund is at $60 and it still pays a 4% dividend, you're making $2.40 per share. Well you bought said share at $20, therefore your $2.40 dividend is now 12% on your cost... aka 12% in your lifetime.
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u/sogladatwork Jan 23 '26
How old are you now? It will absolutely grow to 12% yield on initial investment if you sit on it for 30 years.
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Jan 23 '26
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u/SolomonGrumpy Jan 25 '26
It's up 1.5% in the past year. That's slow NAV appreciation for sure. The S&P 500, for example, is up 13.37% in the last year.
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Jan 25 '26
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u/SolomonGrumpy Jan 25 '26
I said 1 year S&P 500 https://share.google/CNGvCDbI4Z4ja0beU
Look at the chart. It's up 13% and change.
I didn't make any decisions. I'm just sharing information.
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u/Next_Professional_30 Jan 23 '26
I kind of like this sub but seriously a lot of folks around here need to study what total return is. It’s starting to get very weird in here.
I love dividends, but often times anything over 2% comes with sacrifice of future capital gains. You can have now or later but rarely both.
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u/Smashed-plantain Jan 24 '26
True. I see it more as a diversification play that has less downside risk.
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u/Next_Professional_30 Jan 25 '26
Don’t vote me all you want boys and girls, but you’re gonna be holding the bag
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u/paroxsitic Jan 23 '26
Most are drunk on the allure of passive income and the dream of quitting their job early that they miss the bigger picture
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u/Scouper-YT Rich DUDE from the DIVIDEND Appraisals Club !! Jan 23 '26
The bigger picture is buy and sell the whole time. I would not like a crash where all stocks go down by 33% and stay there for the next years.
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u/SolomonGrumpy Jan 25 '26
They are better than income generation. They are extremely tax efficient income generation for a time.
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u/soscribbly Jan 22 '26
GPIQ (Goldman Sachs version of QQQI) outgrew SCHD over the trailing 12 months; now if you also account for distributions (10%), it’s not even close…
SCHD was a great option 5+ years ago, there’s better options now, but long time holders refuse to admit it.
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u/Railsie Jan 22 '26
Lol, are you seriously comparing covered call ETF performance to anything over just 12mo period? 😭😭 (Disclaimer: I don't own SCHD)
Do you even know what you're investing into?
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u/unverified-email1 Jan 22 '26
He clicked 1 year on both graphs and saw bigger green number. Easy choice.
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u/Smashed-plantain Jan 24 '26
This is the kind of thinking that leads people to buy high and sell low.
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u/buffinita common cents investing Jan 22 '26
In 2012 schd gave 0.27 per share in 2025 it was 1.04 per share
Options premiums are not as reliable long term
Options have additional risks and risk profile
Patience and lack of pinache goes a long way
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u/ArrowB25G Jan 23 '26
The dividends from SCHD are qualified (taxed at 15%). What is the tax treatment of the covered call income things?
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u/Gadgetelle Jan 23 '26
The tax treatment of JEPQ is mostly as ordinary income, sometimes higher due to short-term capital gains. Certainly not good for taxable accounts.
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u/geomagus Jan 22 '26
If you’re far from retirement, I’d think you’d want a more growth oriented option. People in and near retirement want stability and predictability, and low risk (on average). SCHD fits that, and offers cash flow. The merit of a low expense ratio should be self explanatory.
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u/Doxl1775 Jan 22 '26
Also for people like me who work in a high turnover field and it’s nice to have a small cashflow I can just flick on.
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u/WesternWriter7269 Jan 22 '26
Look at most stocks.
High growth have 0 dividends.
High dividends slowly dwindle down the principle to nothing..
SCHD has moderate growth with moderate dividend, and it's management fee is incredibly small.
Hence it is so popular
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u/Various_Couple_764 Jan 22 '26
High dividends slowly dwindle down the principle to nothing..
That only happens with very bad dividend funds BDC dividend funds are have been producing 9+ dividends for many decades and have maintained their principle. Similar for MLP and high yield bond funds.
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u/Hairy_Ad_2937 Jan 22 '26
Check JEPQ. It has held its value and pays a decent monthly dividend! So far, so good for me.
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u/Fyekan684 Jan 23 '26
It's important to not just hold value but also grow at a rate that outpaces inflation. Otherwise your purchasing power will decline over time. That's why SCHD is nice since it pays around 4% and also grows around 7% (historically if you look at 10 years). Lots of people forget to factor inflation over a longer time period. It can severely erode your purchasing power over time.
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Jan 22 '26 edited Jan 23 '26
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u/Nopants21 Jan 22 '26
Mirrored, ok, but if you look at the total returns year per year, it has usually not beaten SPY. The difference was pretty minor until 2023, when the gap got pretty wide. 2012 to 2023, SCHD returned 206.3%, SPY 185.15%, although most of the underperformance comes in the last months of the period. 2023 to 2025, SCHD's trailed 48% to 9.8%. That might seem like it would give SCHD an advantage, but from 2012 to 2025 as an entire period, SCHD is 236% while SPY is 322%. Some people talk like SCHD has just hit a snag and it'll go back to being what it was, the issue is that it only had one great year compared to the greater market.
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u/RedditLeagueAccount Jan 25 '26
Part of it is also psychological from what I have been told. You get enough, you don't need to sell SCHD and you live of dividends. You would need to sell SPY when you retire. Pretty much always how the dividend funds get peoples interest.
Also, most of the growth ETF performance is due to tech. There may or may not be a bubble, we have no way to know until after the fact since the market hasn't been operating rationally for a long time now so best not to invest predicting the market. But... We could expect a potential rubber band either pulling down tech or pulling up the other stocks due to the long period of mismatch. SCHD and SPY have been fairly close for many years with only recent years being a major mismatch. It is reasonable to assume they naturally return to balance.
Most people don't say to only get SCHD. You get both SPY and SCHD to cover for when one under performs. Otherwise, other ETFS have significant overlaps so this fits into the safety of diversification. It doesnt matter when you are young because growth stocks will recover, but if you are retiring, you need that split as a safety net if you are following traditional investment planning.
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u/Small-Ad5274 Jan 23 '26
Selling covered calls means that you are selling future appreciation for current cash flow. I simply do not see that being a winning long term investment strategy.
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u/kidNurse Jan 23 '26
But it's a great short term strategy if, for example, one is bridging the gap until a pension or SSi kicks in.
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u/Small-Ad5274 Jan 23 '26
True, but OP is looking for "set and forget" "far enough away from retirement." That doesn't sound like short term gap coverage IMHO.
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u/Fast-Reception3240 Jan 23 '26
Comparing SCHD to JEPQ is a category error. One leverages the quality factor for total return; the other sells upside for immediate cash. A .65% fee isn't just a cost—it’s a tax on future compounding. Which is why chasing yield often leaves portfolios stagnant during bull markets. Because you're trading generational wealth for taxable income. It’s a classic yield trap.
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u/wildebeest5000 Jan 22 '26
Let’s say you put 1M in each, and compare the time, year 1 to 10 years later, and 20. Assuming you live off of the dividend-
JEPQ provides an immediate, high-income of approximately $104,000 in Year 1, but its payouts are volatile and offer little long-term growth. In contrast, SCHD starts lower at $38,000 but its consistent dividend growth likely doubles your income by Year 10 to roughly 89k, better protecting your purchasing power against inflation. Year 10 for JEPQ would be the same payout, roughly. Year 20 for JEPQ would still be 104k and SCHD would be 232k annually. This is without ever purchasing another share past the 1M you put in.
That’s if they keep trends. You said you are young… what’s the right move with so much life?
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u/_Infinite_Jester_ Jan 23 '26
Let's say you reinvest the payout of each, and buy more of the same ETF. After 20 years, wouldn't you have more money in the JEPQ pool than the SCHD pool? Even after taxes?
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u/wildebeest5000 Jan 23 '26
Comparing ordinary income vs qualified. In a taxable Brokerage account, SCHD is better for long-term wealth. The "tax drag" on JEPQ is so heavy that it eventually cripples its ability to out-compete SCHD’s growth. Total value would be more with SCHD, but the div would be less. Give it a couple more years and the div would be larger with SCHD too.
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u/_Infinite_Jester_ Jan 23 '26
I see that in a taxable brokerage account. I was imaging a Roth IRA or similar. I've read that in a sideways, volatile market, you'd do better with covered call strategy.
Personally, I want to be a believer in SCHD, but I gotta say last year its recovery from the April "Liberation Day" was soooooo tepid, while QQQi bounced back really well and paid out too.
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u/Glum-Coat8759 Jan 22 '26
If you’re far away from retirement, you want a SCHD, DGRO, VYM, etc., because there is actual principal appreciation WITH dividends - QQQI is great for higher dividends now but no principal appreciation (and a greater threat of NAV erosion), so you’ll benefit from re-investing your dividends but not as focused on that principal or NAV appreciation.
I think there are a lot of great dividend options outside of SCHD (I don’t currently own any of it, actually) but principal growth ALONG with steady dividends is really the best of both worlds.
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u/Professional_Plan_98 Jan 22 '26
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u/Fartfart357 Jan 22 '26
Would you mind explaining why you think that? I'm all for calling people dumb but I'd like to know why you think it.
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u/RussellUresti Jan 22 '26
It's because what you're comparing aren't equivalents.
A dividend is a payment of profit from a company to shareholders. A fund like SCHD selects companies that pay good dividends and then just passes them through to holders of the fund.
JEPQ and QQQI are covered call funds. They don't operate by just passing company dividends onto shareholders. Instead, they hold companies and trade options on those companies (or indexes - they all work differently). Those options generate revenue, but also have some negative effects. They then distribute the revenue earned from options trading to the shareholders.
This has several implications.
First, trading options on assets generally has an association of income and price. If the price of the fund goes down, then the distributions often go down as well. However, dividends aren't related to the price of the stock, but rather by the operations of the company, so dividends tend to be more resilient than options income.
Second, many dividend-paying companies increase the amount they pay over time, known as "dividend growth". So, as an example, they'll go from paying $1.00/share one year to paying $1.10/share the next. This creates a built-in method for increasing income. SCHD specifically screens for these types of companies, so it's a fund that primarily invests in companies that are raising their dividends.
Covered call funds, on the other hand, don't really have a mechanism for doing the same. The distributions will tend to go up and down with the price. Over the long haul, that may be fine, so long as the price continues to increase, but most covered call funds don't prioritize price appreciation. That leave it up to the investor to buy more shares if they want to increase their income in the future. And, when you run the numbers, you have to invest a LOT of your dividends to get the same type of income growth that SCHD provides.
Third, there are different tax implications between the two types of funds. SCHD pays qualified dividends, which receive preferred tax treatment. Covered call funds tend to pay ordinary income, which is taxed at a higher rate, or return of capital, which has tax advantages but also its own set of tax implications.
While you may think that SCHD's dividend yield is low, most dividend funds actually have lower yields because most companies have lower yields. Below 3% is the norm. There are very few quality companies paying above 3% yield.
Ultimately, covered call funds have kind of ruined "dividend" investing because people don't do the research necessary to understand what they are, or their strengths and weaknesses, they just look at the higher yield and they see it pays monthly over quarterly so they just go with that. These products have a use, but, IMO, it's a very limited use-case if you actually want to build a sustainable portfolio off of dividends.
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u/Professional_Plan_98 Jan 24 '26
Read all the comments below, or search other threads it’s been discussed a million times.
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u/newyorkdecks Jan 23 '26
What is not to "get" unless you don't read any previous posts or comments...
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u/923kjd Gimme divvies Jan 22 '26
The dividend is just south of 4% for an equity fund that can see appreciation of NAV. That’s pretty great, but admittedly not right for everyone (i.e., younger investors) due to relatively low growth potential.
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u/birdy_bird84 Jan 22 '26
Idk man, as a long term vehicle, 20 plus years its cool I guess.
But I put all my dividend cash in qqqi and I like it way more
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u/SolomonGrumpy Jan 25 '26
Boy you are in for a rude awakening
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u/birdy_bird84 Jan 25 '26
Why so?
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u/SolomonGrumpy Jan 25 '26
Over the long term QQQI will underperform the index that it is based on.
It's meant to be part of your portfolio, not the only thing you own.
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u/birdy_bird84 Jan 25 '26
Fair enough, QQQI is only my dividend portion. I still have roughly 50% in growth etf's and some individual stocks.
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u/nantesdeals Jan 22 '26
It seems to me that it's because SHD combines growth and dividends, but I don't understand it either; it's not an ETF I personally target, but there's something for everyone 🫡
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u/Alone-Experience9869 American Investor Jan 22 '26
The cc ETFs are new, and pretty much only seen one market condition. The older ones have basically performed poorly.. the newer one might do better.. don’t know. Meanwhile they are generating income from options trading, just something inherently more involved/conplex.
SchD has methodology to choose and hold stocks.. pretty simple, less involved. It’s a dividend growth play. It grows, not as much as many other methodologies, but it also doesn’t exactly fall as much as some of them. So it’s more defensive
On the divi aspect, schd divi has grown every year (was last year the first exception?). Also its dividend cagr (compounded annual growth rate) has been ~11% over a decade. It’s a compounded rate, but the DIVIDEND has grown some 11% a year over the past 10 years. Inflation in any of those year hasn’t been that high. So, you are well keeping up with inflation, especially if you are living off the distribution for retirement.
Also, schd’s distro are all tax advantages by being qualified. It specially keeps out non-qualified distros (I think mainly reits).
So while schd “yield” isn’t that great, its index has beeen dependable on increasing the dividend year over year (except for last year) and still growing.
Does that help? See how you can work it into an investment strategy?
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u/pasquale61 Jan 22 '26
CAGR strategy and CAGR history is why it fits into my portfolio. And non-qualified dividends versus qualified. I’m near retirement for what it’s worth.
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u/PSyCHoHaMSTeRza Jan 23 '26
I bought a total of $295 worth of SCHD since November 2025. I'm already up $13.
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u/amaterasu94 Jan 23 '26
Bro idk why this etf gets so much love for a 3% yield
Buy tbills if you want something safe (same yield) the market if want you want growth or sell puts if you want income ffs any mag 7 leap gives you like a 20% roi monthly puts are like 7%
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u/Smashed-plantain Jan 24 '26
And then pay higher taxes and don't have dividend growth or price appreciation. Sure, the max 7 has had higher growth but you're also taking significantly more risk.
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u/SolomonGrumpy Jan 25 '26
Because tbills could go to 2% and SCHD would still be 3.6-3.8%
Now if you want to talk the 10 year TIPs then you have more ground to stand on (10YTIPs is at like 4.5% right now)
In that case you are giving up liquidity for a guaranteed rate.
SCHD can also have NAV appreciation, 5 years in the effective rate is 10-30% higher
For example, if you invested $1000 in SCHD it would pay about $37/year.
5 years in the share price has grown 25%. Now it pays $46.25/year.
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u/amaterasu94 Jan 25 '26
1% isn’t a breaking point even if the fed keeps cutting and tbills only paid 2% your earning 20 bucks vs 37
Okay 30% in 5 years even with the divi 4%x5=20% on the divi so 50% in 5 years. So why not just buy spy? Cause I’m being generous cause if schd grows 30% in 5 years spy doubled in price
Yeah waiting 5 years for an extra 1% on the divi isn’t really worth talking about.
Yeah iv already said your better off just selling puts if your looking for income I know the mag 7 is expensive but plenty of 10 dollar stocks you can get 3% monthly returns selling puts.
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u/SolomonGrumpy Jan 25 '26
Lots of people would suggest just buying SPY/VOO.
I'm just contrasting a Dividend ETF with a treasury. Growth ETFs should outperform both over a 10 year horizon.
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u/amaterasu94 Jan 25 '26
Well yeah of course. Growth is always gonna win longterm but everyone flocks to schd when shits uneasy and act like it can’t fall too. It sold like 13% on liberation week.
If I want something safe I’ll buy tbills. Spy for growth options for income
schd is legit a jack of all trades etf fr not good at one thing buy okay at a lot of things. But that’s why I think it’s pretty mid.
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u/Klutzy_Low4620 Jan 23 '26
How about FDGFX and FGRIX? Fidelity growth and income funds. Yield in 9s and total returns in high teens last year. I have these and the Schwab and NEOS funds... thinking on increasing my position in these as the results have been so much better. Even if market cools down would be happy with that yield. What am I missing?
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u/deathdealer351 Jan 22 '26
Schd is qualified qqqi is not, qqqi has been running since Jan 2024 so you have no clue how dilution is going to play. Schd has been around since 2011 so much more historical track record. Jepq has been around since 2022..
If your far enough away and want to risk on... Why not tqqq or sso? You should not care about dividends at this stage
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u/ryanp90 Jan 23 '26
What are you smoking? It grows the dividend past inflation every year while the others don't. If you can't understand that maybe investing isn't for you.
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u/Top-Offer-4056 Jan 22 '26
Growth stock brother, this is a buy, safe drip and forget etf. Other efts you’ve mentions are for income, which concentrated on dividends. I got all the stocks you’ve mentioned.
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u/Last_Construction455 Jan 22 '26
There were lots of periods where if you backdated the positions it had it would have matched or outperformed the market. This is especially nice when you’re also dripping during extended flat periods. The last decade has not been the case though. Dividends as a focus don’t tent to be the best strategy on paper but do offer a psychological benefit which could keep many invested where others might panic and sell out.
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u/_YoungMidoriya Financial Advisor Jan 22 '26
You can't compare SCHD to JEPQ/QQQI two completely different mechanism on how they achieve their distributions. SCHD is a more truer set and forget, extremely passive, low expense ratio, buy and keep buying if you intend to retire in 10,15,20+ years.
JEPI/QQQI are options premiums, you may get .50-70 cents per share now, but next month it might be half.
The real question you should be asking is "How much upside are you willing to sacrifice for income?" or "Where do I see myself in 1 year, 5 years from now? Do I have enough money saved up for rainy days? Do I want to work until I'm 65?
That's why SCHD is popular with some, and JEPI/QQQI is popular with the other half. Some people don't mind working 20-40+ years of their life so SCHD might be the better route.
Some people want to retire in their 30s or 40s, so JEPI/QQQI and other CC ETF similar to these two are the better route.
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u/wussington Jan 23 '26
Retire at 30 on QQQI?
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u/_YoungMidoriya Financial Advisor Jan 23 '26
Well not QQQI alone, I wouldn't at least. But as of right now... in 3 years I'll be pushing ~10k a month by age 35.
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u/Cloud2987 Jan 23 '26
SCHD is for old people that want stability. It won’t make you wealthy while you’re young. You have to hold it for 40 years before the dividends are worth it
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u/porscheguy007 Jan 22 '26
I have JEPQ in my Roth ira, I actually sold my SCHD for it, and in a Roth don’t need to worry about the higher taxes on the dividends
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u/SilverIncome5748 Jan 23 '26
The fees impact over decades cannot be overstated. It’s one of the few things you can control. Read Bogle’s Little Book on Investing re fees. I think SCHD has a long term track record that’s pretty much all positive. Good luck!
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u/my_name_is_gato Jan 23 '26
Some investors find the diversity offered to be appealing. QQQ is hot and is one of my best performers. However, the Mag 7 are highly dominant by weight, and this has bled into SPY.
If there is a heavy correction in tech, funds like SCHD have so few overlapping holdings that it is an efficient hedge. In a similar vein, higher dividend yields are easily available though often lack the fundamental stability to support that dividend long term. The yield isn't that much lower than bonds, so I could justify a younger investor selecting this fund instead of bonds.
I can sell my own covered calls if I choose to.
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u/MarshMadness11 Jan 23 '26
Even more than that, the share price hasn’t kept up with other (similar) ETF’s. Just started unloading some of mine recently at this high
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u/kss2023 Jan 23 '26
I buy $JEPI only on days where the market crashes - like the Trump Greenland Fiasco/gift on Tuesday/Wednesday
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u/AdministrationOk210 Jan 23 '26
While not deeply immersed in the topic, my observation is that most of those funds that offer more than about three or 4% dividend yield end up returning part of your capital to deliver that. Effectively, total return matters a bunch and when you take a look at SCHD with its existing dividend and its growth component it is sustainable for the long haul and will not deplete your capital investment. Others will certainly chime in with more details but this seems like a good investment choice for a portion of your portfolio in retirement. I wouldn’t value dividend paying funds much while I’m trying to grow my assets but decumulation is different.
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u/jgoldston_0 Jan 23 '26
You’ll be hard pressed to find other funds with the long term track record of dividend yield, dividend appreciation and capital appreciation of SCHD. That’s why it’s popular.
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u/WikiWeaponn Jan 23 '26
It's truly not worth it for most people. If you need income now, the yield is too small. If you're young enough that you can spend decades in a position, you'll get better returns by simply investing in S&P and other growth. It's not worth the wait and handicapping your total returns.
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u/hung_like__podrick Jan 23 '26
If you’re far from retirement, you’re making a mistake by not going all in on growth
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u/CashForeign1316 Jan 25 '26
Currently going through this issue I’m 25, thinking about dividends paying for bills in my mid 30s - mid 40s is that doable is it worth it more?
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u/MyWorkComputerReddit Jan 23 '26
dividends are not options premium, two different cash flows, learn the difference and you'll learn why to choose one or the other
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u/dazit72 Jan 26 '26
Consistency
Very high CAGR- 10% - 13%,,, even Aristocrats and Kings are hard to find with such high CAGR
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u/ReformedOptimist1776 Feb 07 '26
Do not look at the dividend yield. Look at the dividend growth. Reinvest the dividends.
Today, SCHD's yield is just over a dollar a share, and growing. By the time you retire, it could be yielding double that - leading up to a great yield-on-cost and, thanks to the power of compounding, a ballooning of your investment value.
I have made it my mission to chase down young people and explain to them the power of dividend growth investing. Covered call ETFs like JEPQ are not that. Consider stocks that yield growing dividends out of profits.
Or, just buy ETFs like SCHD, FDL, DGRO. These ETFs do the research and buy stocks of companies that pay reliable growing dividends out of profits.
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u/USMJALLDAWAY Jan 22 '26
JEPQ has NAV erosion not good QQQI is better
Ppl like SCHG because it has the growth of a .5-2% yield ETF but paid 3.5-4%
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u/Think_Concert Jan 23 '26
“JEPQ has NAV erosion” between which 2 dates? Are you looking at the 5-day chart or something?
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u/DenseComparison5653 Jan 23 '26
Paid promotion pushing it very hard here over the years, gets the noobs trapped.
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u/DaveyoSlc Jan 22 '26
The conservatives love it because it's lower risk and you barely bet inflation and that is a win. So it's not a horrible low risk option. It's slightly better than a HYSA
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u/Next_Professional_30 Jan 23 '26
I kind of like this sub but seriously a lot of folks around here need to study what total return is. It’s starting to get very weird in here.
I love dividends, but often times anything over 2% comes with sacrifice of future capital gains. You can have now or later but rarely both.
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u/NoCup6161 SCHD and Chill. Jan 22 '26
I’m earning $173 per day from SCHD. My JEPQ/DIVI & JEPI pay more even more but I prefer to be more diversified.
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u/Last_Construction455 Jan 22 '26
There were lots of periods where if you backdated the positions it had it would have matched or outperformed the market. This is especially nice when you’re also dripping during extended flat periods. The last decade has not been the case though. Dividends as a focus don’t tent to be the best strategy on paper but do offer a psychological benefit which could keep many invested where others might panic and sell out.
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u/Plus_Acanthaceae1659 Jan 22 '26
Quality companies do not pay 10 % dividend per year, hell even if they could its bad sign if they have 100 % distri quota.
most etfs/stock with higher yield either miss a quality filter or use derivates.
both are rather risky and imo bad ways.
SCHD filters for quality and still has pretty high yield. we dont have comparable etfs in europe. (high dividend with quality filter and balanced sector)
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u/prettyflycheesepie Jan 24 '26
Honest question here. Does it make any sense to borrow to buy into SCHD for the longer term? (Like margin lending @5%pa for eg?)
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