Do You Want Decades Of Passive Income? Buy This Index Fund And Hold It Forever.

Want to know what my favorite dividend-focused exchange-traded fund (ETF) is? Well, it’s him Schwab US Dividend Stock ETF (NYSEMKT:SCHD). It’s worth considering for your portfolio because dividends can be powerful wealth builders, especially when you invest them in more stocks.

Here’s a look at the power of dividends and why you might consider this ETF. (Remember, an ETF is a fund that trades like a stock.)

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To see why I’m a fan of dividend-paying stocks, check out the chart:

Dividend payment status	Average annual total return, 1973-2024
Dividend Producers and Initiators	10.24%
Dividend payers	9.20%
No changes in dividend policy	6.75%
Non-dividend payers	4.31%
Dividend reducers and eliminators	(0.89%)
equal weighted S&P 500 index	7.65%

Data source: Ned Davis Research and Hartford Funds.

See? Dividend payers are not far behind. They can generate a lot of passive income.

The Schwab US Dividend Equity ETF tracks the Dow Jones US 100 Dividend index, which contains around 100 carefully selected stocks with a history of paying dividends for at least 10 years, and which also appear to be linked to high-quality companies. Here’s how the Schwab ETF has performed over the past few years:

ETFs	Recent performance	Five-year average annual profitability	10-year average Annual Return	15-year average annual profitability
Schwab US Dividend Stock ETF	3.5%	10.91%	13.55%	12.30%*
Vanguard S&P 500 ETF	1.1%	13.82%	16.09%	13.77%

Source: Morningstar.com, as of February 9, 2026.
*as of start date, October 20, 2011

I included the performance of a low-fee S&P 500 index fund for comparison, and you can see that the Schwab ETF is not far behind its performance, while offering a batch more income. Better yet, healthy and growing dividend payers tend to increase their payments over time. These are the ETF’s recent top holdings, which recently accounted for around 42% of the fund’s value:

Stock	Weight in ETF
Lockheed Martin	4.60%
Bristol-Myers Squibb	4.29%
Texas Instruments	4.27%
Chevron	4.21%
merck	4.20%
ConocoPhillips	4.13%
PepsiCo	4.06%
Verizon Communications	4.01%
Altria	3.95%
Coca-cola	3.93%

Data source: Morningstar.com, as of February 7, 2026.

Here are a few more reasons why you might want to invest in the Schwab US Dividend Equity ETF:

It has a significant dividend yield, recently 3.8%. That’s more than many good dividend-focused ETFs, and the fund also has a solid growth track record.
The ETF’s expense ratio (annual fee) is just 0.06%, meaning you’ll have to shell out just $0.60 per year for every $1,000 you’ve invested in the fund.
It’s not as tech-heavy as many funds, and recently only 10% of its assets are in tech stocks. 20% corresponded to energy companies and 19% to consumer defense companies. So if, say, an artificial intelligence (AI) bubble bursts, you can rely on your many other assets to protect it.

Any long-term income seeker should consider this solid ETF filled with some of the best blue-chip stocks.

Before buying shares of the Schwab US Dividend Equity ETF, consider the following:

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Consider when netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you would have $414,554!* Or when NVIDIA made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you would have $1,120,663!*

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*Stock Advisor returns from February 15, 2026.

Selena Maranjian has positions in Altria Group, Bristol Myers Squibb, Schwab US Dividend Equity ETF and Verizon Communications. The Motley Fool holds positions in and recommends Bristol Myers Squibb, Chevron, Merck, Texas Instruments, and Vanguard S&P 500 ETFs. The Motley Fool recommends ConocoPhillips, Lockheed Martin and Verizon Communications. The Motley Fool has a disclosure policy.

Do you want decades of passive income? Buy this index fund and hold it forever. was originally published by The Motley Fool

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