Selena Maranjian, The Motley Fool
5 min read
Looking for passive income and a lot of it? Who wouldn’t like that? Passive income can come from multiple sources, such as certificates of deposit (CDs), pensions, annuities, royalty checks, rental properties, and dividends, to name a few. I think dividend income is particularly compelling because:
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Healthy and growing dividend payers tend to increase their payouts over time, often helping shareholders keep up with inflation.
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Such companies also tend to keep paying no matter whether the economy is booming or in a slump.
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Dividend payers are simply great investments, in general. Check it out:
Data source: Ned Davis Research and Hartford Funds.
One of my favorite dividend-focused investments is the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD). If you invest, say, $1,000 per month, you could build a meaningful passive income stream. I’ll get into how much soon.
Meet the Schwab U.S. Dividend Equity ETF
The Schwab U.S. Dividend Equity ETF is an exchange-traded fund (ETF) — a fund that trades like a stock. So you can easily invest in it via most brokerage accounts at any time during trading hours.
It tracks the Dow Jones U.S. Dividend 100 Index, which holds about 100 carefully selected stocks from high-quality companies with at least 10 years of dividend payments. Here’s how the Schwab ETF has performed in recent years — compared to a good low-fee S&P 500 index fund:
Data source: Morningstar.com, as of Sept. 15, 2026.
*as of inception date, Oct. 20, 2011
You can see that while the S&P 500 (SNPINDEX: ^GSPC) index fund performed better, it didn’t perform that much better. And its recent dividend yield is triple that of the S&P 500.
In other words, it tends to deliver solid growth — plus solid dividend income. That’s not the norm. Many good dividend-focused ETFs tend to offer either brisk growth or a meaningful dividend yield, but not both.
