Financial Term Explorer
Dividend Growth ETF
ETFs holding companies with consistent dividend increase histories. SCHD, VIG, DGRO are popular - optimized for long-term wealth building.
📝 Definition
**Dividend Growth ETF** selects companies with consistent dividend increase histories. Current yields may be lower than high dividend ETFs, but high dividend growth rates mean your income and yield-on-cost increase significantly over time.
In Simple Terms
Getting a raise every year beats a high starting salary with no raises. Dividend growth ETFs hold companies that increase dividends annually. In 10-20 years, you'll receive more than high dividend ETFs.
Example
SCHD has ~12% average annual dividend growth. Starting at 3.5% yield, your yield on cost could exceed 10% in 10 years. VIG and DGRO follow similar strategies.
💡 Practical Tips
- 1Make SCHD your core long-term holding.
- 2Reinvest dividends to maximize compounding.
- 3Combine with high dividend ETFs for both income and growth.
⚠️ Common Mistakes
Short-term, dividend growth ETFs pay less than high dividend ETFs, which can be disappointing. Plan for at least 10+ year horizons.
❓ Frequently Asked Questions
SCHD or VIG - which is better?▼
SCHD has higher yield and growth, making it more popular. VIG is more stable with large-cap focus. Choose based on preference.