The S&P 500's Dividend Yield Hasn't Been This Low Since the 1800s. That Makes This Top Dividend ETF Even More Enticing.

Companies have de-emphasized dividend payments over the years, opting to retain more cash to reinvest in their businesses and repurchase shares. Combine that with rising stock prices, and the S&P 500 's dividend yield has fallen to around 1%. That's its lowest level since the 1800s.

As a result, investing money into an exchange-traded fund (ETF) tracking the S&P 500 isn't going to generate much dividend income these days. That makes the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) even more enticing right now. It offers a much higher dividend yield while also delivering strong total annual returns.

Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »

The Schwab U.S. Dividend Equity ETF has a simple strategy. It tracks the Dow Jones U.S. Dividend 100 Index . That index aims to measure the performance of high-yielding dividend stocks with a consistent dividend record. The index screens companies based on several dividend quality characteristics, including yield, five-year dividend growth rate, and financial strength. It holds roughly 100 high-yielding dividend stocks and reconstitutes its holdings once a year to ensure it holds the best high-yielding dividend stocks.

The ETF pays a dividend each quarter. The fund currently has a 3.2% dividend yield based on its payments over the last 12 months and recent share price. To put that into perspective, investing $10,000 into the Schwab U.S. Dividend Equity ETF would generate about $320 in annual dividend income at its current rate. For comparison, investing $10,000 into a top S&P 500 ETF like the Vanguard S&P 500 ETF would generate only about $100 in dividend income each year at the index's current yield.

The Schwab U.S. Dividend Equity ETF's holdings tend to increase their dividends each year. Over the last five years, they've grown their dividends by an average annualized rate of 9.4%. That's faster than the S&P 500's 6.3% dividend growth rate during that period. As a result, the fund's dividend payments should continue to rise:

The Schwab U.S. Dividend Equity ETF isn't only an income story. The fund has also historically delivered strong total returns. That's due to its dual focus on both dividend yield and growth. Historically, dividend growth stocks have delivered the highest total returns among stocks by dividend policy:

A company needs to steadily grow its earnings to deliver sustainable dividend growth. Earnings growth tends to drive long-term stock price appreciation. This growth-driven appreciation, along with a rising stream of dividend income, helps drive the higher total returns of dividend growth stocks over the long term.