Investors keen on generating dividend income through exchange-traded funds (ETFs) have likely come across the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD), a leading player in this sector with $85.2 billion in assets, making it the second-largest fund in its category. However, the Schwab International Equity Dividend ETF (NYSEMKT: SCHY), despite being in SCHD’s shadow, presents compelling reasons for consideration.
Celebrating its five-year anniversary this April, SCHY manages $1.9 billion in assets, which signifies a robust presence in the market. Notably, the recent uptick in international stocks, especially value stocks and dividend payers, has positioned this ETF favorably against its domestic counterparts. Over the past year, international stocks have gained momentum after years of U.S. market dominance, particularly among tech growth stocks.
Performance-wise, SCHY has outperformed the MSCI ACWI ex USA IMI index by nearly 400 basis points for the 12 months ending February 26, underscoring its value in the current market climate. This performance is complemented by its attractive trailing-12-month distribution yield of 3.36%, which surpasses that of the international index by 31 basis points.
Investors focused on dividends will find reassurance in SCHY’s dividend sourcing and the sustainability of its payouts. The ETF tracks the Dow Jones International Dividend 100 index, which consists of 100 high-dividend stocks outside the U.S. While a 3.36% yield is not excessively high, it reflects a portfolio composed of sound financials and stable growth prospects, rather than risky yield traps.
Such attributes highlight the strength of SCHY as a prudent choice for dividend-focused investors, offering a blend of income and value that aligns well with market trends. As international sectors regain strength, this ETF presents a promising opportunity for those looking to diversify their dividend income streams while maintaining financial prudence.