SCHD vs 5% Treasuries: Which One Actually Pays You More?

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The video compares the 10-year Treasury yield (US10YT) with the Schwab US Dividend Equity ETF (SCHD). As of the recording, the 10-year Treasury yield is 5.15%, which is guaranteed and locked in for 10 years, with interest paid semi-annually. After taxes, assuming a 22% bracket, the yield drops to approximately 4.02%. SCHD, on the other hand, offers a current yield of 3.08%, which is not guaranteed and fluctuates with the market. However, SCHD has a history of increasing its dividends annually since its launch in 2011, with a compounded growth rate of 10-11% per year. This dividend growth increases the yield on cost over time. By year 10, assuming average growth, SCHD's after-tax yield on cost could reach approximately 9.5%, significantly outperforming the Treasury's fixed 4.02% after tax. The analysis highlights that Treasury buyers are betting on today's yield versus today's yield, while SCHD buyers are betting on dividend growth over a longer clock. For individuals needing certainty and unable to stomach price swings, Treasuries are a legitimate option, offering a fixed 5.15% return. However, for those seeking growing income and long-term compounding, SCHD's potential for increasing dividends makes it a more attractive 'landlord model' investment. The video concludes that while Treasuries offer immediate certainty, SCHD's growth engine is more compelling for long-term wealth accumulation.

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