Investment Strategy2025-09-28

Revisiting Dividend Growth Investing: Strategies with SCHD and High-Dividend ETFs

As falling interest rates bring renewed attention to dividend stocks, interest in high-quality dividend ETFs like SCHD is surging. A strategic approach that balances dividend yield with growth potential is essential.

관리자CNBC

During a rate-cutting cycle, the relative appeal of dividend stocks has grown significantly. In particular, the Schwab US Dividend Equity ETF (SCHD) has attracted widespread investor attention for pursuing both dividend yield and dividend growth simultaneously. Rather than simply chasing the highest yields, it is crucial to build a long-term income investment strategy by selecting quality companies with a proven track record of sustainable and growing dividends. Understanding the characteristics of dividend ETFs and allocating your portfolio appropriately allows you to pursue both stable cash flow and capital appreciation at the same time.

SCHD's Investment Philosophy and Portfolio Composition

SCHD tracks the Dow Jones U.S. Dividend 100 Index, evaluating companies not simply on yield but on their overall dividend-paying capacity and growth potential. The fund holds 100 carefully screened stocks based on financial soundness, dividend growth history, and profitability, significantly reducing the risk of falling into high-yield traps. With a current annual dividend yield of around 3.5%, it provides meaningful income while the constituent companies' consistent dividend increases offer the prospect of real returns that outpace inflation. The fund also achieves strong sector diversification through a balanced mix of quality companies in consumer staples, healthcare, and financials.

Balancing Dividend ETFs and Growth ETFs in Your Portfolio

Dividend ETFs like SCHD work best when combined with broad-market ETFs such as SPY or VOO. Younger investors may start with a 70% SPY / 30% SCHD allocation and gradually increase the SCHD weighting over time. Investors approaching retirement can secure stable income with a more conservative allocation such as 50% SCHD, 30% SPY, and 20% AGG. While dividend ETFs tend to exhibit lower volatility and act as a defensive buffer during market downturns, their returns can lag growth stocks during bull markets, making the right balance essential.

Dividend Reinvestment Strategy and the Power of Compounding

Reinvesting dividends is the cornerstone of maximizing long-term returns in dividend ETF investing. Using a Dividend Reinvestment Plan (DRIP) lets you purchase additional shares with your dividend income, unlocking the power of compounding. Combining regular monthly contributions with dividend reinvestment also adds dollar-cost averaging benefits, enabling steady returns even in volatile markets. SCHD in particular pays quarterly dividends, providing frequent reinvestment opportunities, and long-term holders can reasonably expect a total annualized return of around 8–10%.

Inflation Hedging and Protecting Real Returns

Dividend growth stocks serve as a natural hedge against inflation. Quality companies can raise product prices in line with inflation, and their dividends often grow at a rate that outpaces rising prices. The constituent companies in SCHD have historically grown their dividends at an annualized rate of 6–8% over the past decade, far exceeding the long-term inflation rate of 2–3%. This makes them attractive not only for their nominal returns but also from a real purchasing-power perspective, making them well-suited for retirement savings or long-term wealth preservation goals.

Tax Optimization and Managing Dividend Income

Dividend income is subject to comprehensive income tax combined with ordinary earned income in Korea, making tax-efficient investment strategies essential. You should consider managing your portfolio size so that annual dividend income stays below 20 million KRW, or take full advantage of tax-advantaged accounts such as IRP (Individual Retirement Pension) or pension savings accounts. Rather than trying to optimize taxes through trading around ex-dividend dates, it is generally more effective to hold long-term and benefit from capital gains tax exemptions. In particular, positions held for five or more years are exempt from capital gains tax in Korea, making dividend ETFs an ideal fit for a buy-and-hold strategy.

결론

Dividend growth investing is a balanced strategy that pursues both stable cash flow and long-term wealth accumulation. A dividend ETF portfolio centered on SCHD provides resilience against market volatility while maximizing long-term returns through the compounding effect of dividend reinvestment. Use the asset allocation calculator to set the right dividend ETF weighting for your age and risk tolerance, and leverage the rebalancing calculator for regular portfolio check-ups — so you can fully harness the advantages of dividend growth investing.

#rebalancing calculator#asset allocation calculator#SCHD ETF#dividend growth#high-dividend investing

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