Here's How Much You'd Need to Invest in SCHD to Generate $1,000 per Month in Dividends
Key Points
The Schwab U.S. Dividend Equity ETF (SCHD) looks at balance sheet quality, dividend growth, and yield in its stock selection process.
Currently, the fund offers a 3.3% dividend yield.
Here's the investment it would take to generate $3,000 in quarterly dividends.
The Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) is one of the most popular dividend stock ETFs in the marketplace today. Its 3.3% yield is a big reason why. It invests in high-quality dividend-paying stocks that have demonstrated a consistent ability to pay and grow their dividends over time.
That strategy has helped this fund increase its total annual dividend paid for 14 consecutive years since its 2011 inception.
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Because of the higher yield, generating $1,000 a month in passive income isn't out of the question, but it does require a rather sizable initial investment. Moreover, this fund pays distributions quarterly, so what you'd actually need to look for is $3,000 in quarterly dividends that you can then budget out to $1,000 monthly.
$1,000 per month in dividends translates to $12,000 per year. If we divide that total by the fund's current 3.3% yield, the required investment comes out to roughly $364,000. At $33.29 per share as of market close on July 24, investors would need to buy just under 11,000 shares of the Schwab U.S. Dividend Equity ETF.
It's worth noting that the distribution rates and quarterly payouts for ETFs fluctuate regularly. This example assumes a constant 3.3% yield. The amount needed for a $1,000 monthly dividend could be more or less as things change. Reinvesting the fund's distributions can also help improve how much income the fund is able to generate in the future.
David Dierking has positions in Schwab U.S. Dividend Equity ETF. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.