NEW YORK, July 13, 2026, 13:08 EDT
Schwab U.S. Dividend Equity ETF NYSEARCA:SCHD needs to boost its second-half distributions by 17.4% year-over-year for its 2026 payout to hit a 9% growth rate. That growth rate is the one used in a popular 20-year income chart. First-half payments barely moved. SCHD traded 0.4% higher at $32.52 Monday afternoon.
The gap is a short-term test of a longer compounding thesis. The linked article runs a $5,000 position from $162.50 in annual income now to $835.52 in year 20, with $8,313.52 total payouts. The model uses a 3.25% starting yield, 9% average dividend growth, without reinvestment. “To be conservative, we’ll assume an average annual dividend growth rate of 9% over the next 20 years,” Motley Fool analyst Matt DiLallo wrote. He points to 11.2% compounded annual payout growth since 2017, and 9.4% five-year dividend growth in selected holdings after the index’s March reset. The Motley Fool
Based on SCHD’s stated payouts, the numbers for 2026 come out differently:
| Period | 2025 payout per share | 2026 actual or required | Change |
|---|---|---|---|
| First quarter | $0.2488 | $0.2569 actual | +3.3% |
| Second quarter | $0.2602 | $0.2525 actual | -3.0% |
| First half | $0.5090 | $0.5094 actual | +0.08% |
| Second half | $0.5386 | $0.6325 required | +17.4% |
| Full year | $1.0476 | $1.1419 required | +9.0% |
Two quarters of payments aren’t enough to set a full-year pattern. ETF distributions jump around, and the annual index reset can shift which stocks pay dividends. SCHD’s turnover was 41.96% as of May 31. The fund had 103 holdings and $98.5 billion in assets on July 10.
The income from Treasurys is much higher than the 3.25% starting yield in the illustration. The Treasury Department gave a 5.08% par yield for a 20-year bond on July 10. Par yield is the estimated return on a new bond sold at face value. So, $5,000 in Treasurys would pay about $254 a year in interest. SCHD’s starting payout is $162.50.
SCHD would need its distributions to rise 4.47% a year for two decades just to match the $5,080 in interest from the Treasury-rate proxy. If you use the 9% case, SCHD’s yearly income crosses $254 in year seven.
| Income scenario on $5,000 | Year-one income | Year-20 income | Total 20-year income |
|---|---|---|---|
| SCHD, flat payout | $162.50 | $162.50 | $3,250.00 |
| SCHD, payout up 4.47% per year | $162.50 | $372.75 | $5,080.00 |
| SCHD, payout up 9% per year | $162.50 | $835.52 | $8,313.52 |
| 20-year Treasury at 5.08% | $254.00 | $254.00 | $5,080.00 |
The comparison leaves out reinvestment and taxes, and doesn’t include Treasury principal payback or whatever SCHD’s value turns out to be in the future.
The story’s 16.7% “yield on cost” comes from taking the year-20 income and dividing by the original $5,000, not using SCHD’s yield at that time. That headline number drops when you factor in inflation too. At a sample 2.5% inflation rate each year, the $835.52 after 20 years would buy about $510 in today’s dollars. The inflation number is an example, not a prediction.
SCHD still pays a higher yield than major rivals. Vanguard High Dividend Yield ETF NYSEARCA:VYM posted a 2.25% 30-day SEC yield and a 0.04% expense ratio, while iShares Core Dividend Growth ETF NYSEARCA:DGRO came in at 1.98% with a 0.08% fee. The 30-day SEC yield gives an annualized look at recent fund payouts minus costs.
| Fund | 30-day SEC yield | Annual expense ratio | Main emphasis |
|---|---|---|---|
| SCHD | 3.32% | 0.06% | Focuses on dividend quality and income now |
| VYM | 2.25% | 0.04% | Targets a wide high-dividend group |
| DGRO | 1.98% | 0.08% | Buys stocks showing dividend growth |
But those risks aren’t balanced. SCHD is an equity fund, so the price can drop, companies in the portfolio can reduce dividends, and payouts could come in below 9% for years. Treasury bonds held to maturity guarantee payments and give back the principal, but the coupon is fixed, inflation eats into their value, and they don’t see any upside from stock-market rallies.
The $835 checks out if you run the numbers, but it’s still conditional. For SCHD to hit 9% in 2026, the next two dividends have to add up to about $0.6325 a share, up from $0.5386 over the same period last year. In this model, 4.5% annual payout growth over 20 years is where SCHD and the 20-year Treasury stand apart right now on income.
