As an investor, imagine the advantages of building a dividend-income portfolio with reduced risk. This type of strategy can generate extra income to cover monthly expenses or reinvest, while also increasing your income over time. In addition, it can help you minimize the impact of stock market volatility and achieve an attractive total return.
The Dividend Income Accelerator Portfolio, which I will transparently document here on Seeking Alpha, aims to provide these benefits to investors. It offers a balanced mix of dividend income and growth, ensuring an attractive total return with reduced risk.
The Dividend Income Accelerator Portfolio
The objective of The Dividend Income Accelerator Portfolio is to generate income through dividends and increase it annually. It also strives to achieve an attractive total return over the long term. Through broad diversification across sectors, industries, and countries, combined with a low-beta factor, this portfolio seeks to reduce risk and enhance performance.
The First Acquisition: The Schwab U.S. Dividend Equity ETF (SCHD)
Today, I will explain why I have selected The Schwab U.S. Dividend Equity ETF (SCHD) as the first acquisition for The Dividend Income Accelerator Portfolio. Investing in SCHD allows us to start building a diversified portfolio from scratch while minimizing risk. It is the perfect strategic buy to successfully implement the investment approach of The Dividend Income Accelerator Portfolio.
Investing $1,000 in SCHD
Over the next few months, I plan to invest $400 ($100 per week) to build The Dividend Income Accelerator Portfolio. However, I have decided to allocate a larger initial position to SCHD to achieve broader diversification and reduce portfolio risk. By investing $1,000 in SCHD, we ensure that subsequent acquisitions do not disproportionately dominate the portfolio.
The Top 5 Holdings of SCHD
SCHD currently holds a total of 104 positions. The top five holdings of The Schwab U.S. Dividend Equity ETF are as follows:
- Amgen: 4.41%
- Cisco Systems: 4.36%
- Broadcom: 4.19%
- AbbVie: 4.19%
- The Home Depot: 4.17%
SCHD’s Sector Weightings
SCHD’s portfolio is well-diversified across sectors:
Health Care: 15.6%
Why SCHD is the Perfect Strategic Buy
When building an investment portfolio from scratch, it is essential to start with a reduced risk level to increase the probability of long-term success. SCHD is the ideal choice because it aligns perfectly with The Dividend Income Accelerator Portfolio’s focus on both dividend income and growth. With a dividend yield of 3.53% and a dividend growth rate of 13.92% over the past five years, SCHD provides a strong foundation for our portfolio.
SCHD in Comparison to Its Peers
Compared to other ETFs, SCHD offers several advantages for investors. Its dividend yield of 3.53% exceeds that of VYM (3.12%) or DGRO (2.38%). Moreover, SCHD’s dividend growth rate over the past five years is significantly higher than DVY (6.24%) or HDV (6.32%). These metrics reinforce SCHD as the most suitable ETF to implement The Dividend Income Accelerator Portfolio’s investment approach.
While investing in SCHD is not without risks, it generally has lower risk factors compared to other high dividend yield ETFs. Due to its focus on high-quality companies with sustainable dividends, the risk of dividend cuts is lower. However, concentration on the top 10 holdings (40.77% of the portfolio) remains a key risk factor.
With the strategic acquisition of SCHD, we have set a solid foundation for The Dividend Income Accelerator Portfolio. By combining dividend income and growth while minimizing risk, SCHD aligns perfectly with our investment approach. This ETF, with its strong track record and diversified holdings, is an excellent choice to build a successful dividend-income portfolio.
Thank you for reading! I welcome your feedback on the selection of SCHD as the first acquisition for The Dividend Income Accelerator Portfolio and any suggestions for future investments.