SCHD DIVIDENDS FROM 5000 SHARES

SCHD DIVIDENDS FROM 5000 SHARES

||||||||||          Most people following SCHD have heard the overview pitch ad nauseum, so I’ll hit you with the Distillation, right from the start. From a real-world share count of 5,063, SCHD paid me $1,408 in Q4 of 2025. So, if all you wanted were the numbers, there you go. But if any of the 7 of you who’ll actually watch this video want more details on SCHD’s construction, or my projected monthly and annual dividend breakdowns, keep watching.

General consumers are concerned with short term, temporary excitement and satisfaction. Wealthy consumers are concerned about sustained, dependable utility, and fiscal optionality. SCHD is a Now & Later investment that gives Wealthy Mindset investors the utility and optionality they’re looking for. A Now and Later asset is one that is productive and appreciating:

·      with productive meaning it can sustain current operations, like paying monthly bills or funding near-term activities,

·      and appreciating meaning its future value is increasing, so it is able to do more over time without additional investment.

||||||||||          SCHD is a low-cost, passively managed ETF that selects its member stocks from the Dow Jones U.S. Dividend 100 Index. SCHD only tracks this Index rather than strictly following it. So, one of the problems for me is that it’ll cull what I consider to be clear winners (AVGO, Broadcom, for example) and keep questionable underperformers (FISV, Fiserv, for y-xample). Even so, I consider its body of work excellent for my purposes, and it is a core holding in 3 of my portfolios. The quick hits from the Fact Sheet are:

·      Inception Date – 20OCT2011

·      Total Net Assets - $71,642,000,000

·      Expense Ratio – 0.06%

·      Target # of Securities Held – 100

·      Distributions – Quarterly

·      Turnover Rate – 28.51%

So those are the particulars (PUHTICKULAHHHS), but how does SCHD actually work. Well, I’m glad you asked, and I will happily explain it to all 4 of you still watching (3 people left after the intro). Anywhooo! SCHD’s order of operations for determining holdings is actually very straight forward and surprisingly quite simple. I’ve broken it down into 8 steps, with the first 4 steps covering individual stock selection and the last 4 steps covering the fund distribution mechanics.

The Stock Selection Criteria are:

1.    A stock needs to have at least 10 years of consecutive dividend payments, and

2.    It also needs to have a minimum market cap of $500M.

3.    Stocks that make it this far are sorted from highest to lowest dividend yield.

4.    Sorting down continues against:  Cash Flow to Debt Ratio, Return on Equity, Dividend Yield, and 5-Year Dividend Growth Rate.

Now that the bucket of stocks is defined, the fund portfolio itself is tuned.

The Fund Composition Criteria are:

5.    4% is the max weight of any individual stock in the index, and

6.    25% is the max weight of any individual sector in the index.

7.    Rebalance occurs quarterly and is a reevaluation that uses Steps 5-6 to ensure that the 4% individual stock and 25% individual sector weight caps are adhered to.

8.    Reconstitution occurs annually and is a reevaluation that uses Steps 1-4 to determine which stocks to add and which to remove, from the fund. **** You’ll see a lot of chatter online around SCHD, at reconstitution time. It’s truckloads of fun listening to all of the churn from the hip cats, with their groovy vids, maaaan. ****

For the real-world example today, I’ve got 3 tax advantaged accounts with SCHD ‘em, and they look like this:

·      Account 1 – 3,972 shares

·      Account 2 – 646 shares

·      Account 3 – 445 shares

·      Total Shares Owned – 5,063

And from those 5,063 shares, the quarterly payment breakdown looks like this:

·      Account 1 with its 3,972 shares pays me $1,105 quarterly.

·      Account 2 with its 646 shares pays me $179 quarterly.

·      Account 3 with its 445 shares pays me $124 quarterly.

·      That gives me a Quarterly Grand Total of $1,408, from SCHD.

And, for as long as I’ve been doing this, investing I mean, I still get giddy receiving these payments. I didn’t have to do anything for this money, except own the stock. The only actual “WORK” is in maintaining discipline by never selling shares and consistently increasing the number of shares via dividend reinvestment, whether that be by a little or by a lot. So, once I own the stock, I essentially do nothing and receive money for doing that nothing. I can buy something with this money, I can let it sit in the account unused, I can pay a bill, I can give it away, I can reinvest it, I can light it on fire. Whatever I want to do with it, the choice is mine.

Now because these payments are quarterly and most of us use a monthly planning model, let’s see what the total quarterly distributions translate to on an annual and monthly basis.

·      Annually these 5,063 shares pay me $5,632.

·      Even though distributions are received quarterly, if I carve this total payout up and manage it as a monthly stipend scheme, this works out to $469 per month, from SCHD.

Again, that’s almost $500 a month, for doing absolutely nothing. That’s not earth-shattering money by any measure, in the U.S., but it is enough to put a dent in some of my financial obligations. And, that $469 that I did nothing extra to get and that I can do anything with, is consistently paid out, year in and year out. And the kicker to all of this is that this consistent payout will continue to grow from 2 specific vectors:

1.    If SCHD’s historical CAGR of roughly 10% is maintained, the dividend payout will continue to double and close to triple the historical rate of inflation, and

2.    If I continue to reinvest dividends, in part or whole, I will increasingly own more shares which will in turn increase the amount of each payout, because of, well, -- math.

||||||||||          All I have to do is continue building and maintaining the fiscal infrastructure, the money machine, by not dismantling it and selling its shares, because those shares are its lifeblood. If I sell the shares, I break the machine. Instead, I must only use the money that the machine itself produces. Sure, that roughly $500 a month is a small amount right now, and not a big deal, but it’s just the output of one holding in a much larger portfolio. And if it doubles or even triples in mass over the years, I’ll then receive $1,000 to $1,500 a month, in SCHD dividends; and that would be a big deal.

So, going back to where we started, SCHD is a Now and Later asset that is productive and appreciating:

·      with productive meaning it can sustain current operations, like paying monthly bills or funding near-term activities,

·      and appreciating meaning its future value is increasing, so it is able to do more over time without additional investment.

1.    Wealthy mindset people are concerned with long-term, sustained fiscal infrastructure functionality and control. They flow money by injecting income into infrastructure componentry via reinvestment, and then, instead of using their income to fund their lifestyle, they instead use the liquid that the fiscal infrastructure produces. Poor mindset people are concerned with temporary, short-term excitement and satisfaction. They flow money by injecting income into lifestyle componentry via selling assets, or by buying non-asset material. Many don’t even attempt to build fiscal infrastructure.

2.    Income can only flow which means it can never be the foundation for an enduring structure. Purpose built assets, however, remain steadfast which means they are inherently fiscal infrastructure. The proper wealth protocol is:  income  >  infrastructure  >  liquid. Income flows into infrastructure to maintain and strengthen it, and then, that infrastructure produces liquid. Excess liquid is the money left over after all current obligations and operational costs have been satisfied. Once the fiscal infrastructure is capable of producing excess liquid, that liquid can be reinjected back into the infrastructure as income. And the exact moment this reinjection of excess liquid occurs is when the model elevates its status to that of a perpetual and self-sustaining entity. It’s now a Money Machine.

To wrap up, nurturing and fattening up the proverbial SCHD goose and only using its eggs is my prime directive. If you haven’t built a Money Machine, but the idea sounds intriguing, you must first think on it and then decide if you’ll even build one. And if you do, you’ll then have to decide if you’ll spend all of its principle and earnings in the short term, depleting the resource; or if you’ll instead spend just the earnings, now and later, never touching the principle, but being able to continue that form of spending from here to eternity.

Good luck, on your investing journey. And, thanks for watching.