Dividends. One of the most delicious words for an investor. If you’re unfamiliar with these tasty investing bites, you might want to take a minute or two and hop on over to our Dividends Jargon Hack. It’s a quick read, and there’s a Hamilton reference, so ….
If you just want the tl;dr, here it is:
Dividends are a distribution of a company’s earnings, a divvying up, if you will.
Some companies choose to have shares that pay dividends. If you are a shareholder of one of these companies, you get a certain amount of the profit the company distributes to its shareholders. The amount you get is proportional to how many shares (or fractional shares) you own.
Dividends are sounding pretty yummy, right? Need more proof in this pudding?
One of our favorite investing mega-minds, Warren Buffett, is a huge fan. If you take a long term view, which we always recommend at Stash, you’re going to want to invest in high-quality companies, and hold on to them for years. That’s investing, not trading. And it’s one of the approaches that helped Warren Buffett ultimately turn his paper route money into more than $65 billion. But take a closer look at Buffett’s biggest investments, and you’ll see that there’s a bit more to them. Aside from having strong fundamentals, what do companies like Coca-Cola, Procter & Gamble, and Johnson & Johnson have in common? They pay dividends. Dividends that tend to get bigger, year after year. Coca-Cola, for example, has increased its dividend payments every year for over 50 years! And companies that pay dividends that way tend to generate a lot of cash, and to have more reliable earnings.
What do you get when you bake a bunch of dividend paying companies up in one single investment? Delicious Dividends!
Building Up an Investing Appetite?
Delicious Dividends could be for you, if you want to have your investing cake, and eat it too. Instead of picking one company, you can pick an ETF packed with companies that have strong financials, and the potential to grow more valuable over the long term. That’s the cake. But these companies also generate dividends, that provide short term returns for investors. That’s the “eat it too” part.
Delicious Dividends is an even more flavorful part of an investing banquet when balanced with other investments. So don’t forget to diversify. It’s part of the Stash Way, after all.
Recommended reading: Diversification: How to Choose Investments When You Can’t Predict the Future
But What Are the Ingredients, Exactly?
Delicious Dividends is our Stash-ified name for The Schwab US Dividend Equity ETF. Check out the fund website for all the equity nutrients that make up this investment. Expense ratio, holdings, dividend yield, etc.
Keep reading: Now That’s What I Call an Investment! ETFs Explained
This Exchange-Traded Fund tracks the Dow Jones U.S. Dividend 100 Index. The fund invests in around 100 companies with a 10-year history of paying dividends, and having strong financial footing. Many are massive, relatively stable companies, like Coca-Cola, Procter & Gamble, and Johnson & Johnson (all name dropped above), as well as Chevron, Microsoft, and Pepsi. Looks like soda* companies are keeping their investors’ interests at heart as well as our carbonated beverage needs.
*From the South and prefer a coke? Or how about a pop? Maybe you even prefer soda-pop, if you are all about that #nostalgia. When it comes to what you call your fizzy beverages, you do you.
Schwab U.S. Dividend Equity ETF seeks to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Dividend 100 Index. The fund invests at least 90% of its net assets in stocks that are included in the index. The index is designed to measure the performance of high dividend yielding stocks issued by U.S. companies that have a record of consistently paying dividends, selected for fundamental strength relative to their peers, based on financial ratios. Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones). The Dow Jones U.S. Dividend 100 Index is a product of S&P Dow Jones Indices LLC and/or its affiliates.