The Schwab U.S. Dividend Equity ETF (SCHD) has several attractive attributes, including a diversified mix of financials, healthcare, consumer staples, industrials, energy, and consumer discretionary stocks, as tracked by the Dow Jones U.S. Dividend 100 Index. The fund boasts an impressive trailing 12-month distribution yield of 3.3% and a low total expense ratio of 0.06%.
However, it’s essential to note that SCHD has a relatively low weighting in technology stocks, accounting for just 8.8% of its assets, which is lower than the broader S&P 500 Index’s 33-per-cent technology weighting. This reduced tech exposure may help explain why SCHD’s five-year annualized total return trailed the S&P 500’s annualized return of about 17%.
For Canadian investors, there are a few key factors to consider before investing in SCHD. Firstly, due to exchange rate fluctuations, investors will need to convert their Canadian dollars into U.S. currency to purchase the fund’s units, incurring potential costs. Secondly, distributions from SCHD may be subject to a 15-per-cent U.S. withholding tax.
A more favorable option for Canadian investors is to consider a Canadian-listed ETF that tracks the S&P 500 and trades in Canadian dollars. These funds can help minimize currency exchange costs and avoid the hefty fees associated with purchasing a U.S.-listed ETF like SCHD.
Investors should also be aware of the book cost and adjusted cost base (ACB) when investing in securities, such as the spinoff shares of South Bow Corp. from TC Energy Corp. Double-checking ACB figures is crucial to avoid mistakes.
By considering these factors, investors can make informed decisions about investing in SCHD or other U.S.-listed ETFs.
Source: https://www.theglobeandmail.com/investing/education/article-lifting-the-hood-on-a-us-dividend-etf-and-solving-a-south-bow-mystery