Big news hit the investment world recently: Charles Schwab announced an SCHD share split. It’s not every day you see this happening with ETFs, so investors everywhere sat up and took notice. This change doesn’t impact the overall value of anyone’s investments, but the SCHD share split could have some interesting ripple effects.
Why all the fuss, though? Let’s break down what an ETF share split actually means and how the SCHD share split could shake things up.
Table of Contents:
- Understanding ETF Share Splits
- The Details of the SCHD Share Split
- Understanding the Implications
- Additional Schwab ETF Splits
- FAQs about SCHD share split
- Conclusion
Understanding ETF Share Splits
Stock splits have become more commonplace, with high-flying companies like Nvidia and Broadcom making headlines with their own moves. Schwab Asset Management decided to bring that strategy to ETFs, making investing more accessible. But how exactly does a share split work, and does it actually change the value of an ETF?
What a Share Split Means
Simply put, a share split increases the number of shares available, and at the same time, decreases the price per share. Think of it like slicing a pizza into more pieces. You still have the same amount of pizza, just in smaller slices. Similarly, your investment in an ETF retains its value, even though the individual shares are worth less after the split. Imagine owning 100 shares of an ETF priced at $100 each, for a total value of $10,000. After a 2-for-1 split, you’d own 200 shares, but they would be worth $50 each. You’re left with the same $10,000 investment.
The Psychology of Share Splits
Stock splits don’t alter a company’s fundamentals, so why do companies even bother? It largely boils down to investor psychology. For some people, seeing a share price in the hundreds of dollars might be intimidating. Breaking down the price through a split could make those same ETFs more attractive to people with limited budgets. That lower entry point might convince more investors to hop on board.
Pros and Cons
There’s more to the story though. Like any financial move, share splits have their pros and cons. Here’s a breakdown:
Pros:
- Smaller investors find it more approachable.
- Potentially more liquidity with increased shares on the market.
- Increased confidence among investors.
Cons:
- Can lead to a false impression of value growth.
- May cause short-term volatility.
- No impact on the underlying value or health of the fund itself.
The Details of the SCHD Share Split
On September 25, 2024, Schwab Asset Management made the announcement that 20 Schwab ETFs were undergoing forward share splits. Here’s what that means for the SCHD ETF:
SCHD Gets a 3-for-1 Split
One of the most significant aspects of the announcement is that SCHD, the Schwab U.S. Dividend Equity ETF, is undergoing a 3-for-1 split. You can track Schwab’s news and commentary on this and other changes on their website. Investors will be issued two additional shares for each one they already own, bringing down the cost of acquiring a share considerably. These splits affect anyone who owns the ETFs when the markets close on October 9, 2024. They will be payable after the close on October 10th and will start trading at their post-split price the next day, on October 11th.
Understanding the Implications
So, what does all this mean for current SCHD investors, and should it impact how you approach this ETF moving forward? My take is that it’s a net positive.
No Need for Changes
If you’re invested in SCHD, there’s no need to make any immediate adjustments to your portfolio because of the share split. Long-term investors in SCHD have benefited from substantial growth thanks to its impressive 10-year return average of over 11%. The lower cost could actually lead to more people choosing this ETF in the future, driving up demand.
This change could even make SCHD more enticing as a dividend-focused investment. That dividend payout will become even more appealing when combined with the lowered share price. New investors, who might have been hesitant at a higher price, could see SCHD as a great entry point into dividend-paying ETFs. It’s quite possible the move could drive up investor interest and generate even more money flowing into the fund. Think of it like suddenly finding your favorite snack on sale. It’s tempting to buy even more.
Additional Schwab ETF Splits
SCHD is far from the only Schwab ETF being split. Other popular ETFs will see similar reductions in price. These include:
- SCHG, the Schwab US Large Cap Growth ETF, with a 4-for-1 split.
- SCHM, a US Mid-Cap ETF, going for a 3-for-1 split.
- SCHA, the Schwab U.S. Broad Market ETF, is doing a 2-for-1 split.
With these adjustments, Charles Schwab seems to be catering to the growing demand for accessible investments, like these [Mutual Funds] you can find here. It’s likely they’re aiming to capture more of the investor pool currently drawn to options like SPLG (the S&P 500) due to its low cost per share, even though the fund is essentially tracking the S&P 500 just as effectively as funds with a higher price tag. Lower prices can open doors for people who want to start building their portfolio without waiting to save enough for expensive individual shares, but they also have the potential to accelerate growth even for seasoned investors. With [Mutual Funds], investors don’t need a lot of capital to gain a sizable market share. They provide smaller investors with exposure to assets and markets, diversification, professional fund management, and lower risk.
Perhaps even Warren Buffet will jump at this newest arbitrage opportunity to split stock, as shared in this recent article discussing how Berkshire Hathaway B is on the list. After all, even those big companies find these types of splits tempting.
Focus on Long-Term Growth
Amidst these changes, it’s essential for SCHD investors, and really anyone looking at the stock market, to stay focused on long-term investment strategies. As with any ETF that tracks the broader market, ups and downs are part of the ride. Rather than letting daily market shifts rattle your cage, zoom out. Consider how SCHD (or other investments) have performed over three or five-year stretches. That big picture outlook helps keep perspective.
Want to learn more about how this fund has performed? You can dive into its growth over the last decade in this in-depth review: The [Charles Schwab US Dividend Equity ETF](https://dividendcalculator.net/schwab-us-dividend-etf-history/) (SCHD): A Journey Through Time. [Continue Reading about The Schwab US Dividend Equity ETF (SCHD): A Journey Through Time →](https://dividendcalculator.net/schwab-us-dividend-etf-history/) Curious about similar stocks and how they fare after a stock split? Read on: [These 2 Unstoppable Stocks — Up 153,000% and 287,000% Since Their IPOs — Are Logical Candidates to Announce a Stock Split in September](https://www.barchart.com/story/news/28267163/these-2-unstoppable-stocks-up-153000-and-287000-since-their-ipos-are-logical-candidates-to-announce-a-stock-split-in-september).
FAQs about SCHD share split
Is SCHD splitting?
Yes, as of September 25th, 2024, Schwab has officially announced the SCHD ETF will split. The planned ratio is 3-for-1, giving current holders three shares for every one they currently hold. The official date of this share split is set for after market close on October 10, 2024.
How much is SCHD paying per share?
The recent SCHD dividend payout, declared for September 25, 2024, is set at 75 cents per share. Based on this latest payment, the current annual dividend payout would be roughly $2.83 per share, leading to a yield of approximately 3.33%.
What is the SCHD ex-dividend date?
To be eligible to receive the upcoming SCHD dividend, you need to own shares by September 25, 2024, which is the ex-dividend date. The dividend payment is scheduled to happen on September 30th.
What is a SCHD 10 year return?
Over the last decade, the SCHD ETF has generated a stellar return, averaging 11.5% per year. Its impressive track record makes this fund attractive for long-term investors seeking growth.
Conclusion
Change can be unnerving in the world of investing, so it’s understandable that an announcement like the SCHD share split might raise eyebrows. But remember, these kinds of splits generally mean good things. It’s like getting more for your money with lower share prices. The overall value remains the same, and for a successful ETF like SCHD, it could signal strong confidence in the fund’s future. That might draw even more investors. Keep in mind that these events are often accompanied by promotional campaigns, increasing visibility and potentially pushing share prices up in the long run. Regardless of what happens next with the SCHD share split, it’s crucial for investors to remain focused on those big picture investment goals. Stay informed, weigh your options carefully, and make decisions that best suit your needs. Most of all, don’t panic. These kinds of changes happen. Adjust your sails accordingly, and stay on course for long-term investment success.
