Investing in Dividend Stocks: A Path to Passive Income

By Selena Maranjian, July 27, 2025

In the world of investing, generating passive income is highly sought after. The Schwab U.S. Dividend Equity ETF serves as a prime example of how investors can build wealth with dividends while enjoying growth potential. This exchange-traded fund (ETF) combines both reliable income and appreciation opportunities in its portfolio.

The current price of the Schwab U.S. Dividend Equity ETF is $27.29, with a market cap of approximately $119 billion, reflecting a slight change of -0.11% as of July 28, 2025, at 10:21 a.m. ET. Investors are often drawn to dividend-paying stocks due to their historical performance. From 1973 to 2024, dividend growers and initiators achieved an average annual total return of 10.24% compared to 4.31% from non-payers, according to a Ned Davis Research study.

Why is the Schwab U.S. Dividend Equity ETF so appealing? The ETF not only offers a competitive dividend yield of around 3.9% but also focuses on high-dividend-yielding stocks recognized for their strong financial performance. The ETF tracks the Dow Jones U.S. Dividend 100 Index, which selects companies based on their ability to consistently pay dividends.

Among the top holdings in the ETF are Texas Instruments, Chevron, and PepsiCo, all of which contribute significantly to the income generated by this investment vehicle. With recent figures indicating that top holdings can yield between 2.41% and 6.86%, investors can expect solid returns as long as these companies maintain their financial health.

Historical performance also offers insight into the potential for future gains. Over the past 10 years, the Schwab U.S. Dividend Equity ETF has averaged a 11.39% annual gain, surpassing the S&P 500’s average of 13.51%. While the latter may offer faster growth, it lacks the reliable income provided by the Schwab ETF.

Next, investors considering stocks should examine Medtronic, Becton, Dickinson, and Universal Health Realty Trust, all of which have reliable dividend histories. Medtronic boasts a 48-year dividend streak while Becton, Dickinson has an impressive 53 years. Universal Health Realty Trust is more stable, with a steadfast focus on rental income from medical office properties, yielding about 7.4% currently.

Ultimately, understanding the balance between income and growth is essential for any investor. Strategies like incorporating diverse dividend-paying investments can yield a steady flow of passive income. As always, individual investor goals and risk tolerance should guide decision-making in such matters.

For those seeking passive income strategies, the Schwab U.S. Dividend Equity ETF and companies like Medtronic and Becton, Dickinson present valuable options worth exploring.