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Schwab Dividend ETF to Debut Wednesday

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October 18, 2011 2:58 pm
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Charles Schwab (NYSE: SCHW) is expanding its ETF lineup once again, this time with the debut of the Schwab US Dividend Equity ETF (NYSE: SCHD) on Wednesday Oct. 19, 2011. In typical Schwab fashion, the new ETF isn’t the most original concept on the market, but it features a minute expense ratio of just 0.17%.

SCHD will track the Dow Jones U.S. Dividend 100 Index. To be included in that index, companies must have market caps of at least $500 million and have maintained at least 10 consecutive years of dividend payments. The market cap-weighted index excludes REITs, master limited partnerships, preferred stocks and convertibles.

Index constituents are evaluated on the following traits: Cash flow to total debt, return on equity, dividend yield and 5-year dividend growth rate. Companies can be removed it appears their dividends may be in danger of a cut or suspension.

In an effort to keep the Schwab US Dividend Equity ETF somewhat diversified, no single stock will get a weight of more than 4.5% and no sector will receive an allocation greater than 25%.

SCHD looks like it could be a possible rival to the SPDR S&P Dividend ETF (NYSE: SDY), which has an expense ratio of 0.35%, and the iShares Dow Jones Select Dividend Fund (NYSE: DVY), which has an expense ratio 0.4%.

California-based Schwab had 14 ETFs with $4.1 billion in assets under management at the end of September, according to data from the National Stock Exchange.


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