$10,000 Invested in SCHD a Decade Ago Would Be Worth This Much Today

Ten years ago, $10,000 might not have seemed like enough money to produce meaningful passive income. By investing it in the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD), shareholders found that wouldn't be the case.

Over the past 10 years, a hypothetical $10,000 investment in this fund would have grown to $34,400, assuming dividends and capital gains were reinvested. That's a $24,400 gain without contributing a single additional dollar.

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That's impressive for an exchange-traded fund primarily known for producing dividends. More importantly, it illustrates why dividend investing doesn't necessarily require choosing between generating income and building wealth.

SCHD turned $10,000 into more than $34,000

The Schwab U.S. Dividend Equity ETF has generated a 13.1% annualized return over the past 10 years. Those returns resulted in the original $10,000 growing into roughly 3.4 times the initial investment.

That performance puts the fund in the top quartile of Morningstar's Large Cap Value category.

Past performance, of course, doesn't guarantee future returns over the next decade. But the Schwab U.S. Dividend Equity ETF's results demonstrate something very important for investors: a dividend strategy can deliver significant capital appreciation alongside a steady, predictable income stream. The dividends are actually an important reason why.

Reinvested dividends can create a powerful compounding component

The fund's strategy isn't focused solely on making quarterly dividend payments.

For investors who don't need the income today, reinvesting those dividend distributions buys additional shares. Those additional shares can then generate further dividends, which can purchase still more shares. That snowball effect becomes increasingly powerful as this process continues over time.

That can be one of the most attractive catalysts for long-term investors.

Someone investing $10,000 today doesn't have to immediately turn the Schwab U.S. Dividend Equity ETF into a source of regular income. If your time horizon is 10, 20, or 30 years or more, you can spend decades using those dividends to accumulate significantly more shares before transitioning to using the fund as an income generator.

The reason that SCHD's strategy has worked