Want a Portfolio That Pays You $1,000 a Month in Passive Income? This Dividend ETF Could Get You There.
Key Points
The Schwab U.S. Dividend Equity ETF (SCHD) has averaged around a 3.1% dividend yield over the past decade.
SCHD's $0.2665 Sept. 28 dividend payout is nearly double that of a decade ago.
SCHD's criteria act as a natural vetting process for investors, ensuring quality companies.
Many forms of passive income exist, but in the stock market, the most common is dividends. Dividends reward investors for simply holding onto a stock, regardless of how the stock price moves.
If you like the idea of an extra $1,000 monthly without any extra work, dividends are one of the best ways to get there. You don't have to rely on a single stock to do it, either. A dividend ETF like the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) is your ticket, and it comes with less risk than a single stock.
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How to reach $1,000 monthly
SCHD pays dividends quarterly, but because the stocks it holds pay dividends at different times, the payouts fluctuate and aren't as fixed as with single stocks. Its past four payouts per share (including the one it'll pay on Sept. 28) were:
- $0.2665 (September 2026)
- $0.2525 (June 2026)
- $0.2569 (March 2026)
- $0.2782 (December 2025)
For our example, we'll use the $1.0541 it has paid out over the past 12 months. To reach $12,000 in dividends for the year, you would've needed to own around 11,385 shares. At the time of writing, SCHD's price is $33.28, meaning you'd need around $378,893 if you were starting from scratch.
These numbers will fluctuate with changes in share price and dividends, but in either case, most people don't have $380,000 to invest at once. Most people will have to build it over time, but it becomes much easier thanks to compound earnings and SCHD's focus on companies that prioritize dividend growth.
Why invest in SCHD over other dividend ETFs?
There are plenty of dividend ETFs to choose from, but I like SCHD because of its stock-selection criteria. To be considered, a company needs at least 10 consecutive years of dividend payments, at least five years of dividend growth, an above-average dividend yield, and a strong balance sheet.
If a company checks those boxes, it's likely in a good place. That helps ensure SCHD's dividend remains healthy and continues to grow. Over the past decade, it has averaged a yield of around 3.1% and has nearly doubled its payout (based on Sept. 28's payout).
SCHD Dividend data by YCharts
A 3% dividend yield is higher than you'll find in most dividend ETFs and some well-regarded dividend stocks. SCHD has four Dividend Kings (companies with at least 50 consecutive years of dividend increases) in its top 10 holdings (Coca-Cola, Procter & Gamble, Abbott Laboratories, and PepsiCo), and its yield is higher than all except Abbott.
It will likely take some time to build up a large enough stake to generate $1,000 a month. However, with SCHD, you don't have to second-guess its consistency or payout stability. Keep adding to it consistently and watch your stake build.
Stefon Walters has positions in Coca-Cola. The Motley Fool has positions in and recommends Abbott Laboratories. The Motley Fool has a disclosure policy.