SCHD & FNDB: 2 Schwab ETFs to Boost Retirement Income

Those seeking to generate passive income in retirement via holding high-quality portfolios of dividend-paying stocks have a number of excellent options to choose from. In terms of the high-quality blue-chip exchange traded fund (ETF) providers in the market, Schwab remains one of my top picks and is a key platform I personally use to invest.

There are other great ETF providers out there, and I use Vanguard as well. But for those looking specifically for Schwab ETFs in the dividend realm, this piece is going to cover two of the top ETFs in the space I think are worth considering right now.

Here’s the bull case for both, and my conclusion as to which may be the better pick for the average investor nearing retirement looking to hold for the next 10-20 years. 

Schwab U.S. Dividend Equity ETF (SCHD)

As most readers may already be well aware, the Schwab US Dividend Equity ETF (SCHD) is one of my core holdings, and I expect this will be the case until retirement (for me, that’s a few decades away). I’m a believer in using ETFs as part of a portfolio diversification strategy, with this “bucketed” approach providing me with the kind of durability and stability I’m looking for in my retirement accounts. 

Perhaps my most prominent reason for selecting SCHD as one of my top holdings is the fact that this particular ETF tracks the Dow Jones U.S. Dividend 100 Index. That means that only the 100 largest (and typically highest-quality) companies are included in this ETF, adding the kind of portfolio stability I’m looking for.

Now, investors will receive a current dividend yield of 3.8% for their troubles, which is about as good as it gets among high-quality dividend ETFs like these. And with a six basis point (0.06%) expense ratio, that kind of low-cost diversification is really quite remarkable. 

Given this fund’s historical performance, and its risk-adjusted returns, SCHD remains one of my top picks for those nearing retirement looking to sleep well at night with their passive income generating portion of their portfolio. 

Schwab Fundamental U.S. Broad Market Index ETF (FNDB)

Another top long-term ETF holding I’ve recommended in the past, the Schwab Fundamental U.S. Broad Market ETF (FNDB) is another great option for those seeking reliable and consistent dividend income in retirement. 

This ETF does come with a higher expense ratio (at 0.25%), and a lower yield (around 1.7%). So, while investors may still beat the overall yield on most index funds, on its face, it may appear at first glance like there’s not that much upside to holding an ETF like FNDB.

That said, I do think this marginally higher yield is worth considering, due to how this portfolio is constructed. Taking a more active approach to tilting its portfolio toward value, the Schwab Fundamental U.S. Broad Market Index ETF weights its portfolio holdings on a number of fundamental metrics. These include sales and earnings growth, cash flow, and dividend growth/quality. Thus, this fund holds a higher percentage of cyclical and less-mature dividend payers.

As such, the ETF’s current yield may be underwhelming for some. But for those banking on future growth (and capital appreciation upside), this is perhaps the ETF to go with. 

Which One to Buy?

Personally, I’m going to stick with SCHD as my core dividend ETF portfolio holding. This ETF’s current yield (and upside potential) is better than most Schwab ETFs in the market, and most from other providers as well. At this fund’s expense ratio, and factoring in the quality of its holdings, I can sleep well at night. That’s what’s most important when it comes to investing – making the game as boring as possible.