Key Points
- Many of Schwab’s ETFs offer attractive dividend yields and low operating fees.
- With some planning and a large enough account size, you can leverage Schwab’s suite of ETFs to earn $10,000 per year.
- It sounds nuts, but SoFi is giving new active invest users up to $1k in stock, see for yourself (Sponsor)
When your cash hoard grows big enough, you can start planning out your passive income streams. To that end, Schwab’s broad variety of exchange traded funds (ETFs) eliminates the need for individual stock picking and can unlock substantial dividend yields.
If you choose your ETFs carefully, you could potentially earn $10,000 in passive income per year when your account size is big enough. The three Schwab funds I’ll tell you about today have an average dividend yield of (3.67% + 3.76% + 2.96%) / 3, or 3.46%.
So, if you have $300,000 to invest equally into those three Schwab ETFs, you should receive $300,000 x 3.46% or $10,380 worth of dividends after one year. Sure, the funds will deduct operating expenses from the share price, but Schwab’s fees are quite low. Now, let’s take a closer look at three Schwab ETFs that you can strategically use to generate $10,000 or more in annual passive income.
Schwab U.S. Dividend Equity ETF (SCHD)
Loading stock data...The first $100,000 of a $300,000 investable cash account could be dedicated to theSchwab U.S. Dividend Equity ETF(NYSEARCA:SCHD). This fund has “Dividend” in its name, so you know it will appeal to passive income seekers.
A diversified fund with 103 stocks in its holdings list, the Schwab U.S. Dividend Equity ETF provides portfolio exposure to established names across multiple economic sectors. Stocks on the SCHD ETF’s holdings list include dividend payers likeChevron(NYSE:CVX),Coca-Cola(NYSE:KO),Lockheed Martin(NYSE:LMT), andAltria Group(NYSE:MO).
Granted, an annual operating fee (known as the expense ratio) will be automatically deducted from the fund’s share price. However, the Schwab U.S. Dividend Equity ETF’s expense ratio is ultra-low at just 0.06%, which equates to $0.06 per year for every $100 invested in SCHD.
Best of all, the Schwab U.S. Dividend Equity ETF currently features a trailing 12-month (TTM) distribution yield (i.e., the fund’s historical dividend yield) of 3.67%. With a yield of that size, you’ll be a big step closer to reaching your goal of $10,000 in passive income per year.
Schwab International Dividend Equity ETF (SCHY)
Loading stock data...The next $100,000 of a $300,000 portfolio could be used to purchase shares of theSchwab International Dividend Equity ETF(NYSEARCA:SCHY). Whereas SCHD focuses on U.S.-based stocks, the SCHY ETF concentrates on non-U.S. businesses that offer high dividend yields.
Don’t worry if you’re not experienced with non-U.S. investments. One of the benefits of ETF investing is that a fund management firm like Schwab can conduct thorough research. Then, the firm can carefully pick non-U.S. businesses for inclusion in an ETF like SCHY.
The names on the holdings list of the Schwab International Dividend Equity ETF include Roche Holding(OTC:RHHBY), Vinci(OTC:VCISY), Wesfarmers Limited(OTC:WFAFY), andTotalEnergies(NYSE:TTE). You might not be familiar with the 142 stocks on the SCHY ETF’s holdings list, but that’s fine since the fund’s management did all of the due diligence on your behalf.
It’s not a terrible idea to diversify your portfolio beyond the U.S., and you can easily achieve this with Schwab International Dividend Equity ETF. The fund only deducts an expense ratio of 0.08%, and the SCHY ETF’s eye-catching 3.76% TTM distribution yield should attract income collectors around the world.
Schwab U.S. REIT ETF (SCHH)
Loading stock data...Finally, to potentially achieve $10,000 in annual passive dividend income, the third $100,000 of a $300,000 account could be allocated toward theSchwab U.S. REIT ETF(NYSEARCA:SCHH). This fund includes 124 stocks in its holdings list, and it focuses on real estate investment trusts (REITs) but “excludes mortgage REITs and hybrid REITs.”
At this point, you might wonder whether it’s safe to invest in REITs. Yet, this is another way to diversify your portfolio. Plus, the Schwab U.S. REIT ETF has picked out well-established real estate names likeRealty Income Corp.(NYSE:O), Simon Property Group(NYSE:SPG), Crown Castle(NYSE:CCI), and Welltower(NYSE:WELL).
All of a sudden, real estate investing is easier than you ever imagined it could be. You’ll end up paying an annual expense ratio of 0.07% to hold this fund, but that’s a small fee in the grand scheme of things. After all, the Schwab U.S. REIT ETF instantly expands your portfolio into the REIT sector while bringing you substantial passive income.
Speaking of which, the Schwab U.S. REIT ETF currently features a TTM distribution yield of 2.96%. When you average that out with the yields of SCHD and SCHY, the math works out to roughly $10,000 worth of annual dividend payouts from a $300,000 portfolio. With that, you now have a strategic plan to unlock an easy and powerful income stream from just three premier Schwab ETFs.
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