SCHD Is Great. But Most Investors Are Only Getting Half The Income It Can Generate.

Here’s the little-known strategy that changes everything.

If you follow income investing at all you have almost certainly heard of SCHD.

The Schwab US Dividend Equity ETF has become one of the most talked about ETFs in the income investing world — and for good reason. It holds 100 high quality dividend-paying US companies, it has a decades-long track record of growing its dividend consistently, and it does all of this at an expense ratio of just 0.06%.

For a conservative income investor it checks nearly every box.

Stable companies. Growing dividends. Low cost. Real underlying value that appreciates over time.

But here is what most SCHD investors are leaving on the table every single month.

The Income Most SCHD Holders Never Collect

SCHD currently yields approximately 3.5% annually on a trailing basis.

That dividend gets paid quarterly — March, June, September, December — and it has grown consistently over time which means your effective yield on original cost basis keeps improving the longer you hold.

For a lot of income investors that dividend alone is the entire strategy.

Buy shares. Collect dividend. Reinvest or spend. Repeat.

And honestly — that is a perfectly reasonable approach.

But it is not the complete picture.

Because once you own at least 100 shares of SCHD you unlock the ability to do something the vast majority of retail investors have no idea is even available to them.

You can sell covered calls against your position.

And when you do — you stop having one income stream from your SCHD position.

You start having two.

What A Covered Call Actually Is

A covered call is simply an agreement you make with another market participant.

You agree to potentially sell your 100 shares at a specific price — called the strike price — on or before a specific date called the expiration date.

In exchange for making that agreement — the other party pays you a premium upfront.

That premium is yours to keep regardless of what happens next.

If SCHD stays below your strike price through expiration — you keep your shares, you keep the premium, and you do it again next month.

If SCHD rises above your strike price and your shares get called away — you keep the premium, you collect any appreciation up to the strike price, and then you use that capital to buy back in and start the process over.

Either way you are generating income from the same shares that are already paying you a quarterly dividend.

What The Math Actually Looks Like

Let’s use round numbers for illustration.

SCHD is currently trading around $27 per share.

A 100 share position requires approximately $2,700 in capital.

The quarterly dividend at a 3.5% yield produces approximately $94 per year on that position — or roughly $23 per quarter.

Now add a covered call.

Selling a monthly out-of-the-money covered call on 100 shares of SCHD at a conservative strike — roughly 3 to 5% above the current price — might generate somewhere in the range of $15 to $40 in premium per month depending on current market volatility and how far out of the money you go.

At the conservative end that is an additional $180 per year from the same $2,700 position.

Combined with the dividend — you have moved from approximately $94 per year to potentially $270 per year or more from the same shares.

That is not a minor improvement.

That is nearly tripling the income from the same capital without buying a single additional share.

These figures are illustrative examples only and are not guarantees of future results. Actual results will vary based on market conditions, strike selection, timing, and individual execution.

Why SCHD Is Particularly Well Suited For This

Not every stock or ETF is a good covered call candidate.

You need liquidity in the options market — tight bid-ask spreads and meaningful open interest across multiple strike prices and expirations.

You need an underlying position you are genuinely comfortable holding long term — because if your shares get called away you need to be willing to buy back in rather than panic.

And you want an underlying asset that is stable enough that you are not constantly worried about catastrophic downside events destroying your position while you are managing options on top of it.

SCHD passes all three tests.

The options market on SCHD is liquid enough for retail investors to execute efficiently.

The underlying portfolio of 100 quality dividend-paying companies is one of the most stable foundations available in the ETF universe.

And because you already wanted to own SCHD for its dividend — being comfortable holding through volatility is built into the original thesis.

The One Thing You Must Manage Around

This is critical and cannot be skipped.

SCHD pays a quarterly dividend.

To receive that dividend you must own the shares on the ex-dividend date.

If you sell a covered call that gets exercised before the ex-dividend date — your shares get called away and you miss the dividend entirely.

This is the most common mistake income investors make when they first start layering covered calls on top of dividend ETFs.

The fix is simple but it requires attention.

Always know when SCHD’s next ex-dividend date falls before selecting your covered call expiration.

Either choose an expiration date that comes before the ex-dividend date — so your shares cannot be called away before you capture the dividend.

Or choose a strike price far enough out of the money that early assignment is unlikely.

Managing around ex-dividend dates is not complicated once you build it into your process.

But ignoring it is an expensive mistake.

The Bigger Picture

The strategy described in this article is not complicated.

It does not require you to be a professional trader.

It does not require you to stare at a screen all day.

It does not require you to predict where the market is going.

It requires you to own a quality ETF you already believe in — and then systematically rent out your shares to the market every single month in exchange for premium income.

Most income investors spend years collecting a 3 to 4% dividend yield and calling it a complete strategy.

The covered call layer is what turns that 3 to 4% into something significantly more powerful — without adding leverage, without adding speculative risk, and without changing the fundamental nature of what you own.

You are still a conservative income investor.

You are just a more productive one.

Where To Learn More

If this concept is new to you and you want to see how it works in practice — including the exact process for selecting strikes, managing expirations, and building a complete income strategy around ETFs like SCHD — the Ark Options Workshop is a free 90-minute training that walks through the entire framework from scratch.

No income claims. No hype. No Lambos.

Just a systematic approach to generating income from assets you already own or want to own.

**Click here to register now**

Pete Pru

This article is for educational purposes only and does not constitute financial advice. Options trading involves substantial risk of loss and is not suitable for all investors. Most traders lose money. The income figures referenced are illustrative examples only and are not guarantees or projections of future results. Always conduct your own research and consult a qualified financial professional before making any investment decisions.