Key Points

Dividend growth stocks have delivered the highest returns over the long term.
The Schwab U.S. Dividend Equity ETF focuses on high-yielding dividend-growth stocks.
The ETF has an exceptional performance track record.

I have been investing for more than two decades and have made numerous errors along the way. Some of my largest missteps involved pursuing high-yield or high-growth stocks. One key lesson I have gained is that the optimal strategy balances growth with yield.

With those insights in mind, if I were rebuilding my portfolio from the beginning today, the initial purchase to anchor it would be the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD). Here is why this fund serves as an outstanding foundation.

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Dividend growth outperforms all else

A data collection that shifted my approach comes from returns grouped by dividend policy. Hartford Funds releases an annual report called The Power of Dividends: Past, Present, and Future. One standout set shows average annual total returns and volatility for S&P 500 stocks based on dividend policy.

Returns	Beta	Standard Deviation
Dividend Growers and Initiators	10.22%	0.89	15.97%
Dividend Payers	9.20%	0.94	16.71%
No Change in Dividend Policy	6.87%	1.02	18.45%
Dividend Cutters and Eliminators	-0.96%	1.22	24.80%
Dividend Non-Payers	4.21%	1.18	21.91%
Equal-Weighted S&P 500 Index	7.74%	1.00	17.55%

Data source: Hartford Funds and Ned Davis Research.

The figures demonstrate that dividend growers and initiators have produced superior returns with reduced volatility compared to higher-yielding stocks or pure growth stocks. This evidence has prompted me to move my holdings steadily toward dividend growers.

Top dividend growers gathered in one fund

The Schwab U.S. Dividend Equity ETF offers focused access to top-quality, high-yielding dividend growth stocks. It follows the Dow Jones U.S. Dividend 100 Index, which tracks 100 high-yielding dividend stocks with consistent payment histories. The index evaluates firms on dividend quality factors such as yield, five-year dividend growth rate, and financial strength.

The growth filter stands out. The ETF has issued a steadily increasing cash distribution since its launch in 2011. The fund has expanded its payout at an 11.2% compound annual rate since 2017. Its current holdings have raised their payouts by a 9.4% compound annual rate over the past five years, up from 8.6% before the prior annual reconstitution in March.

The Schwab U.S. Dividend Equity ETF emphasis on dividend growth has generated strong results for investors. It has achieved an average annualized total return above 12% across the past one-, three-, and 10-year periods, plus since inception in 2011 (13.1%).

Constructing a portfolio around dividend growth strength

The Schwab U.S. Dividend Equity ETF forms an excellent core holding for a fresh portfolio. It should generate solid total returns with lower volatility over extended periods. That is why it would be the first ETF I would acquire when building my portfolio anew today.