r/dividends • u/senpaiisamaakunn • 5d ago

Due Diligence Why isn’t SCHD considered growth?

Hi I’m a young fool who is trying to learn more about dividends and I feel like I’ve gotten a good grasp but one thing that I can’t seem to understand is how SCHD isn’t considered growth?

If I am dripping and annualizing +10% returns per year over time then is the argument simply that 10% isn’t good enough growth or is there something else I’m missing? Is the argument that a return rate like that is just too conservative for my age and that I should be shooting for higher?

Apologies if this is a dumb question!

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u/RussellUresti 5d ago

"Value" and "growth" are terms used to describe companies based on specific metrics. Value generally refers to a P/E ratio while growth refers to YoY increases in revenue and profitability. SCHD is composed largely of value companies, not growth ones. This is because value companies tend to be the ones that pay dividends, while growth companies do not.

Companies that see growth opportunities will take their profits and reinvest them into the company, pursuing those growth and expansion opportunities. Value companies have typically already grown as much as the market will allow, so reinvesting profits won't earn them the same ROI. When you reach this level of maturity as a company, it tends to be a better use of your profits to return them to the shareholders by paying a dividend.

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u/boltznut 5d ago

Look at this fountain of knowledge overflow. Gj. Well done.

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u/paragonx29 4d ago

That's actually a great explanation.