In this podcast, Motley Fool contributors Tyler Crowe and Matt Frankel discuss:

• Taiwan Semiconductor's most recent earnings report.
• The torrid pace of AI spending.
• Lower mortgage rates are taking the cork off existing home sales and refinancing.
• Insulation contractor TopBuild now does roofs.
• Ferrero will acquire WK Kellogg.
• Two stocks worth watching this earnings season

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy.

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A full transcript is below.

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This podcast was recorded on July 10, 2025.

Tyler Crowe: Taiwan Semiconductor's earnings say full steam ahead for AI, and the housing market is getting some of its best news in a while. You're listening to Motley Fool Money. Welcome to Motley Fool Money. I'm Tyler Crowe, and joining me today is Motley Fool analyst Matt Frankel. Matt, thanks for being here.

Matt Frankel: Thanks for having me. It's always fun to be on with you.

Tyler Crowe: We do a lot of conversations. Offline and doing one here is going to be great. On today's show, the snacking industry is actually coming for the breakfast aisle. The housing market saw its first green shoots in a while. There's merger talk in the building supply industry, and Matt and I are going to give some earnings watches for the upcoming quarter. But we're going to start today's show with Taiwan Semiconductors because they just released their second quarter or June earnings earlier today. Taiwan Semiconductor manufacturing's revenues rose about 39% in the quarter, and TSMC CEO C.C. Wei said that AI chip demand still, they think is outstripping the current supply that they have, and the company has pledged to spend $100 billion ramping up manufacturing. Now, Matt, I'm probably not alone in being flabbergasted, every time I hear a projection about spending and CapEx related to AI. NVIDIA just passed the four trillion dollar market cap threshold a couple days ago, and it's still hard to wrap my head around. I think the easy question is, will AI spend, continue to grow? I think that's a little too easy. I want to ask you, do you see AI CapEx spending continuing at this rate?

Matt Frankel: Well, a 40% year over year growth rate is only sustainable for so long. This is an acceleration. It's worth mentioning. Last year, in 2024, Taiwan Semi reported 30% year over year revenue growth. This is a pretty big acceleration after an already very strong year. I think over the past 30 years, Taiwan Semi's revenue's grown at about 18% annualized rate. It's really picked up in the past couple of years because of all this AI spending. This is a massive business, especially for one that doesn't make any of its own products. It makes products on behalf of other companies. All of their customers, just to mention some on their customer list, Apple is their biggest one. But they also make chips for NVIDIA, AMD, Broadcom, Tesla there are a lot of companies they make chips for on a third party basis, and these are deep pocketed companies that are all committing a lot of money to AI investment. When you ask will this continue if you're asking over the next five years, I could see that growth rate actually being sustained. But if you're asking beyond, at some point, we're going to hit a peak, but I don't think we're there just yet.

Tyler Crowe: The interesting thing is a lot of the companies I follow are like in the construction industry related to AI, like all the electrical supply contractors and the builders and things like that. Their backlogs for AI data centers and all that stuff is still growing at really large rates. Their remaining performance obligations, their word for backlogs, have been growing at similar rates, which is also, to me, a leading indicator for a lot of this because you got to build the data center before you can put any chips in it. Beyond the same thing, beyond the five years, it starts to get really murky because we're 40% for five years straight is a lot, but certainly over the next 2-3 year window, it doesn't seem unrealistic to continue to keep doing this.

Matt Frankel: One of the really good ways to get ahead of demand is to look at what the data center industry is doing, and I'm glad you brought up building for that reason because so many data centers are being built right now. There's a lot of if you look at, Digital Realty Trust or Equinix's, construction activity, there's a lot going on, and it creates like a forward looking projection, if you will, because, the company will order a new data center, start building it. At some point later, it's going to be filled with chips and things like that. That's a really good forward indicator of how demand is doing.

Tyler Crowe: Let's put the rubber of the road here really quick regarding Taiwan Semi. It's a recommendation in the Hidden Gems dividend service and several other molecule services. After seeing these results and the current valuation that we're looking at for Taiwan Semi, do you still see the stock as a buy?

Matt Frankel: Given how quickly its revenue is growing, it trades for about 24 times forward earnings, there's not a lot to dislike about this company. That 1.2 trillion dollar valuation sounds high, but it really isn't when you look at how the business is doing.

Tyler Crowe: If we're looking at these numbers for 2, 3, 4 years, a company can grow into a 26 times forward earnings valuation or forward earnings valuation pretty quick. It's hard to see it being an awful investment from here at current valuations. Next up, mortgage rates are on the decline, and the housing market is responding quick.

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Tyler Crowe: The housing market has been looking for something, anything resembling good news lately. Finally, it got a little bit. The average rate for a 30 year mortgage in the United States has declined five weeks in a row, and it's now down to 6.77%. Now, that certainly isn't the sub 3% mortgages that we saw in the 2021 period, but it is a nice improvement from the greater than 7% mortgage rates we've seen so far this year, and I know I have been like mortgage rate shopping for quite some time. Matt, the housing market appears to be taking advantage of this situation much faster than we've seen other mortgage rate movements lately, and something you've been following is like housing volume is really picking up because of this.

Matt Frankel: You mentioned the other mortgage rate moves. This isn't the first time we've seen mortgage rates cool off from the highs, which is why this move is a surprise to a lot of people. Mortgage rates peaked at about 8% when inflation was really high. But even they've come down a little bit, then they go up, then they come down, they go up, and they have oscillated between 7.5% and like six and three quarters in recent times. All the other times it's happened, this is a key difference. All the other times it's happened, there hasn't been a lot of housing inventory. Now that's changed. There's a lot more inventory on the market with this decline. People who want to buy houses are taking advantage, just to name some of the statistics just last week alone, week over week, application volume was up more than 9%. Refinancing is 56% higher than it was a year ago. People who got mortgages in the 8% range are finding it valuable to refinance right now. Purchase applications are up 25% year over year on a seasonally adjusted basis. The numbers really look surprisingly strong, given that, you know, over the past week, the average mortgage rates down two basis points. It's not like it's been a sharp decline in the past week, but now buyers are suddenly coming into the market.

Tyler Crowe: Following the housing move for the past couple of years, it's been trying to poke somebody a stick and say, Come on, do something and it's funny to actually see it finally happening. Part of me wonders if it's a little bit mortgage and also our mortgage rates, excuse me, and a little bit of just like the people have been putting it off and using this as that time to start taking the lid off, especially with the buying season here in the spring and summer. Now, you and I and a couple other people, longtime Motley Fool contributors, analysts. We spend way too much time talking about housing, investing in housing, investing in real estate. There's some side channels that get a little unhinged. But with mortgage rates are declining, the probability of a rate cut actually looks to be in sight something that I have been hesitant to say for quite some time. There is pent up demand for homes. Matt, with this backdrop, what stocks in this particular market look interesting to you?

Matt Frankel: I've been saying the Home Builders forever, and so have you, but it's really tough to gauge the dynamics of Home Builders when existing homes are becoming more appealing than they had been for a long time. I won't say that. I'm really looking at rocket right now, RKT the largest lender. They're a very profitable company. I think refinancing in particular is a big opportunity. I mentioned refinancings up 56% year over year, and that's because rates fell to 6.77%. Imagine if rates fall to 6% or 5% in the next couple of years, Americans are sitting on $35 trillion in home equity that's the most ever, and a lot of it's just waiting to be tapped. A lot of people want to do big projects, but won't because it's expensive.

Tyler Crowe: Actually, the Refi number was the one that really stood out to me, as well. I didn't go to the mortgage originators, like Rocket. I actually went to the home repair and remodel industry because, again, this is everyone stared at their walls in 2020, 2021, did all those projects, and now it's been like three or four years. Everyone's starting to get that itch to do projects again and lower mortgage rates. A refinancing is a good opportunity to that. I've been looking at companies like Home Depot that have underperformed just about the time the interest rates started to climb a few years ago, we had that big pull forward in remodel activity and things like that. Home Depot and a lot of other building supply companies, and one company in particular is TopBuild. It's an insulation distribution and installation contractor specifically for insulation. That company just so happens to be the company we're going to be talking about next. Continuing on our theme of the housing market, home repair, building products, there's a company Top bill. They just mentioned it as a distribution installation contractor. They recently announced it's going to acquire Progressive Roofing. Matt, can you just give a quick breakdown of what this deal looks like?

Matt Frankel: Progressive Roofing, as the name implies, they're one of the largest commercial roofing installers in the United States. They make about 70% of their money from what's called reroofing, which is people like me needing a new roof and maintenance and 30% from new construction homes, both of which can get pretty nice tailwinds, if the real estate market keeps going as it's going. The deal is it's $810 million in cash. It looks like a great deal for TopBuild if if the market heads in the right direction. That's about nine times progressives EBITA over the past 12 months. They expect there to be some synergies, like whenever you acquire two businesses that have some overlap, you can usually combine some operations and things like that and get some cost savings. It looks like a strong acquisition. They're going to have to take on debt to do it. TopBuild has about 300 million in cash right now. Another roughly half a billion dollars will need to come up with through debt, but they have a really healthy balance sheet, about 1.4 billion in debt with $11 billion market cap business and highly profitable. I like this deal. I think this is not the last consolidation we're going to see in the industry in 2025.

Tyler Crowe: We've seen some more splashy things when it comes to acquisitions here. Brad Jacobs of XPO Logistics and United Rentals and a bunch of other we'll call it the boring economy guy who rolls up companies is getting into building supplies with QXO. It seems to be a hot activity lately as mergers acquisitions roll ups in this industry. TopBuild as I said, installation of insulation the real dirty work. Anybody that's done contracting work knows that insulation stinks as a job to do. But it's been a spectacular investment after it got spun out of Masco Corporation in 2015, several Motley Fool recommendation services. You and I have been following this company in this industry for quite a while. For TopBuild, much of its success has come from rolling up those small distributors and installation contractors across North America. It's been their calling card is going and buying out mom and pops who are maybe coming to the end of their time of wanting to run a business or some small regionals that success story of Bolt-on acquisitions. Now, roofing isn't insulation. Honestly, I'm a little anxious when a company makes an acquisition that is slightly tangential to what they're doing. Am I being a little too apprehensive here, because, I do tend to be a little bit more nervous than you.

Matt Frankel: Well, insulation and roofing are related parts of the building process. It's not like they're an insulation company, and they're acquiring a concrete manufacturer or something like that. It's a very related part of the business. But I do get your point. Some of the synergies I mentioned come from the fact that there's a lot of overlap in the processes. You generally don't put in a new roof without checking your insulation at the same time. There is a lot of overlap here. But no, I definitely get your point when companies start to step outside of their wheelhouse a little bit. It'll be worth watching, but it looks like the price is right, so they have some wiggle room to have a learning curve in there, if you will.

Tyler Crowe: I'm probably a little too nervous by nature, but I do have to admit, as I've looked at this deal, I think overall, we can talk about the business stuff. But more importantly, for me, I think management has developed enough of a track record that I'm willing to give them the benefit of the doubt right now or tie goes to the base runner, I guess, if you will. With the refinance market picking up so could activity in the roofing business along with installation. It might be a good time to be making this acquisition. Speaking of M&A, we're going to move on to our next store here, which is going from roofing to the breakfast aisle because that seems to be getting a hot market that also just happens to be getting a little bit sweeter. Earlier today, Ferrero Rocher or Ferrero International, the Italian private company has agreed to acquire WK Kellogg for about an enterprise value of 3.1 billion. WK Kellogg, of course, was the cereal business that was split out of Kellanova I believe it was either last year or a couple of years ago. It was a relatively recent split for the two companies where Kellanova wanted to focus on the snacking industry. WK Kellogg was going to take the cereals.

But Ferrero Rocher is very much a candy company, and it's interesting to see them going in this direction. It's about $23 per share for WK Kellogg in cash. About 31% premium Keeling's closing price today. Matt, what did you actually think about this deal? I know it's hard to really put a pin on private companies, especially an Italian one. We don't seem to have a lot of information on private Italian companies here in the US public markets. But we've seen tons of M&A activity and flirting with M&A activity. We saw Mondelez and Hershey talking about getting together early or late last year. Do you have any insights as to why you think there's so much talk and commotion in particular in the package food industry lately?

Matt Frankel: Well, in this particular case, there's a couple key takeaways. One is that Ferrero has been building out its US portfolio for some time. They acquired all of Nestle's US candy business a couple of years back, for example. You might have some of their products in your house right now and not know it. It's summertime. A lot of people keep those bomb popsicles in their fridge. That's a Ferrero product. They have a lot of brands that are very well known to Americans. Second, and this goes more to the broad package food industry that you were talking about. The definite trend is to not only diversify your product portfolio, but diversify it in a way toward healthier products. Now, I know a lot of Kellogg cereals, frosted flakes are not health food, but things like Kashi and raisin bran and rice krispies. We've seen a lot of the companies that specialize in sweets, like Coca-Cola, Pepsi, really diversifying to not necessarily health foods, but to more healthy brands that are that consumers seem to want more nowadays than their traditional products. I think it's a diversification maybe anticipate some changing tastes in the market to insulate themselves from being just a sweets company. That's a common trend that we've been seeing throughout the packaged food industry.

Tyler Crowe: Seems like it's an industry that has been struggling with debt, with trying to figure out a lot of what they're doing with their maybe some brands that are getting a little stale, trying to do some refreshes at the same time. For a lot of these snacking companies, really high cocoa prices haven't exactly helped them along the way when it comes to trying to make a lot of this work. A lot of dividend stalwarts have been really, I would say struggling to really grow the business, and we've seen it in their valuations of late. Honestly, with the package food company industry, I don't know if I'm that interested in any stocks right now, but it's certainly much more fascinating to watch with a lot of these portfolio reshufflings. Is there anyone in particular that is on your radar?

Matt Frankel: I honestly think Pepsi and Coca-Cola are the two standouts in the industry still and have done the best job of adapting to changing tastes over time out of all the package food companies. I'd probably give it to Pepsi because they have a lot more food than beverage.

Tyler Crowe: On our way out here, let's take a quick 30 seconds. Second quarter earnings is coming up. What are you watching?

Matt Frankel: Well, banks are the obvious answer just because they're reporting first, but they're also a really good proxy for just general consumer health. By looking at things like loan defaults, by looking at, trading volume trends, how volatile things have been there. There's a lot you can tell from bank earnings that have implications on pretty much every other company in the United States. That's really what I'm watching next week. Prologis is another company that reports early that we've talked about that is on my radar. They say they're nearing an inflection point. I want to see if we're there yet.

Tyler Crowe: This quarter, I'm actually going to be watching Home Depot for a lot of the reasons that we mentioned when we're talking about mortgage rates. Less for the actual earnings, but I really want to dive into the earnings transcript and see if some of this activity that we just talked about with Refi is translating into increased demand. If management thinks that this is a continuing trend or a little bit of a short term blip that we've been hoping would actually last longer than a couple of quarters here with the mortgage market. Matt, thank you so much for joining me today on Motley Fool Money. As always, people on the program have interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and are not approved by advertisers. Advertisements or sponsored content are provided for informational purposes only. See our Fool advertising disclosure. Please check out our show notes. I'm Tyler Crowe. Thanks for listening. We'll see you tomorrow.

Matt Frankel has positions in Advanced Micro Devices, Digital Realty Trust, Prologis, and Shopify and has the following options: short January 2026 $135 calls on Shopify. Tyler Crowe has positions in Prologis. The Motley Fool has positions in and recommends Advanced Micro Devices, Digital Realty Trust, Equinix, Hershey, Home Depot, Nvidia, Prologis, Shopify, Taiwan Semiconductor Manufacturing, Tesla, and TopBuild. The Motley Fool recommends Broadcom, Nestlé, WK Kellogg, and XPO and recommends the following options: long January 2026 $90 calls on Prologis. The Motley Fool has a disclosure policy.

In this podcast, Motley Fool host Anand Chokkavelu and contributors Jason Hall and Matt Frankel discuss:

• AI stocks in the data center space (including CoreWeave).
• Winners and losers in energy and solar from Trump's "big, beautiful bill."
• Ranking the intellectual property of Warner Bros. Discovery, Comcast, Disney, and Netflix.
• Prime Day and other made-up holidays.
• Stocks to watch.

And Dave Schaeffer, founder and CEO of Cogent Communications, talks with Motley Fool analysts Asit Sharma and Sanmeet Deo about how Cogent's deals with customers like Netflix and Meta Platforms work and what keeps him awake at night.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy.

A full transcript is below.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 1,053%* — a market-crushing outperformance compared to 180% for the S&P 500.

They just revealed what they believe are the 10 best stocks for investors to buy right now, available when you join Stock Advisor.

See the stocks »

*Stock Advisor returns as of July 14, 2025

This podcast was recorded on July 11, 2025.

Anand Chokkavelu: Yes, we're talking all kinds of stocks. This week's Motley Fool Money Radio Show starts now. It's the Motley Fool Money Radio Show. I'm Anand Chokkavelu. Joining me are two of my favorite fools, Jason Hall and Matt Frankel. Today, we'll talk about stock market winners and losers from the Big Beautiful Bill. We'll pit Superman versus the Hulk, and we'll of course debate stocks on our radar. But first, we'll discuss whether there's an AI opportunity in investing in data centers. Upstart data center company, CoreWeave, again made news this week this time for announcing the purchase of Core Scientific for $9 billion. This allows it to add infrastructure to consolidate vertically as it seeks to gain market share among AI and high performance computing customers. CoreWeave is just the tip of the data center iceberg. Matt, what categories of data center opportunities are out there?

Matt Frankel: First, you have hyper scalers. These are companies like AWS, Microsoft, Desha. They are companies that operate the large scale data centers. They offer computing and storage infrastructures to customers. As Anand put it, there's CoreWeave, which is one of the least understood recent IPOs that I know. [laughs] They rent out GPU data center infrastructures to customers. It's not always practical for companies to invest in all of NVIDIA's latest chips on their own, for example. That's really what they do. There's the REITs still, Digital Realty and Equinix are the two big ones. They own the data centers. CoreWeave is actually a big Digital Realty tenant. Then there's power generation. I know Jason's going to talk about this a little bit later in the show, but data centers consume a lot of power, and it's growing at an exponential pace. These chips that NVIDIA produces, they are power drains. Nuclear, especially, could be a big part of the solution, but solar and other renewables are also in there.

Jason Hall: We're definitely in the land grab phase of the infrastructure buildout for accelerated computing. I think accelerated computing is maybe a better description than just AI. We talk about the Cloud REIT large. As we see more of the companies involved start to monetize things like AI agents at scale. I think that's where these investments are going to pay off.

Anand Chokkavelu: Big question. Do any of these categories interest you all for investing?

Matt Frankel: Well, I'm well known as being the real estate guy at the Motley Fool, so it shouldn't be a big surprise, but Digital Realty is my second largest and my second longest running REIT investment in my portfolio. I'm an Amazon shareholder, and I know that's not their only business, but AWS is the primary reason I own it. I don't own CoreWeave yet, and I think the stock is a little bit pricey, to say the least. But the more I read about it, the more I'm intrigued by the company. As I mentioned, they're a big tenant of Digital Realty, so I have some exposure already.

Jason Hall: The things about CoreWeave that concern me is the stock is definitely expensive. But if the opportunity is even close to as large as we think, it could still work out, but they're going to need a lot of money to pay for what they're trying to do and depending on how much of that is from raising debt versus secondary offerings of shares, there's still a lot of questions there. But, Anand, you've given me a chance to talk about Brookfield here. [laughs] How do I not take that opportunity? But I do think that there's a couple of Brookfield entities that are positioned really well here. I want to talk about the providing the energy part of it. Brookfield Renewable is really in the driver seat here as a global provider of renewable energy on multi decade contracts. It is not just accelerated computing, it's the energy transition REIT large. We've already seen it strike big deals with Microsoft and others to provide renewable power on those multi decade contracts. The dividend is really attractive, too. BEP, that's the partnership, yields over 5%. The corporate shares BEPC, it yields about 4.5%. Since mid 2020, that's when Brookfield Renewable rolled the corporation part out and restructured its dividend. The payouts been increased almost 30%. There's a lot to like here. Beyond the yield, I think it's primed to be a total return dynamo over the next decade. If you don't want to own a company that's in the energy part, you want to own the infrastructure, just take a look at sister company Brookfield Infrastructure. The tickers there are BIP and BIPC.

Anand Chokkavelu: Of course, these aren't the only AI stocks out there. Hi, NVIDIA. Do any other areas of AI interest you guys?

Matt Frankel: I love that. You can't talk about AI and data centers without talking about the chipmakers. NVIDIA just hit $4 trillion today as the day we're recording this. NVIDIA is an amazing business, and it has more room to grow than people think just in the data center accelerator space, which is why they're getting so much attention for good reason. The market size is expected to roughly double over the next five years. That's not even to mention the opportunities they have in chips for autonomous vehicles, chips for gaming and more but I prefer AMD, which is often referred to as NVIDIA junior, but I don't think it should be. It's an incredibly well run company that's been a mistake to bet against in the past. As Intel found out the hard way, just having a dominant market share in an area of chip making is not always enough.

Jason Hall: An area of the market that I think could do really well some of the legacy enterprise software giants. I think there may be underappreciated winners from AI. I'll use Salesforce, ticker CRM as an example. It's really starting to get traction with things like it's data cloud and with AI agents. It's starting to sell. We're seeing really rapid uptake of those things and monetization. It has a benefit, an advantage over a lot of these AI start-ups that are just pure AI businesses. It's already a trusted integrated partner with hundreds of thousands of enterprises. It knows their business, it knows their challenges, regulations, opportunities and that credibility, I think, is an edge that we don't give enough credit to. We shouldn't underestimate switching costs, I guess, is what I'm really getting at. You look at Salesforce rates for about 21 times free cash flow and less than seven times sales. That's a really good opportunity. I think it equates to double digit returns if it can just grow revenue around 8-12% a year over the long term, which I think it can.

Anand Chokkavelu: We started to talk a bit about energy and the need for it with all this AI. Let's talk about the energy industry implications of the Big Beautiful Bill, which was signed into law last week. Jason, can you give us the summary of the energy portions?

Jason Hall: Summarizing anything's hard for me, but I'll try. I think the short version is the incentives for renewables, they're getting gutted, really. There's a 30% investment tax credit or ITC for short. The residential solar and battery systems portion of that had been in place to run through 2032 before gradually declining for a few years after that. That now expires. The systems have to be fully installed and commissioned by the end of this year. The commercial ITC for solar and wind projects was on a similar track, but now it expires at the end of 2027, but those projects must begin construction by July 4th of 2026 to qualify for that 30% tax credit. It also terminates the tax credit for new and used EVs, $7,500 for a new EV and up to 4,000 for a used EV. The purchase has to happen before September 30th of this year, so a couple of months. Lastly, it ends the US regulatory credits around vehicle emissions that automakers buy largely from Tesla. This is a significant and profitable revenue stream for EV makers that essentially is going away.

Matt Frankel: Jason, when you say renewables are being gutted, you're essentially referring to solar and wind, if I'm not mistaken. It's not gutting anything for nuclear power, correct?

Jason Hall: That's correct. These things you get are the pure renewables as we think of them.

Anand Chokkavelu: Let's put a fine point on this with specifics. Who are the relative winners and losers, Jason?

Jason Hall: This could be an hour long show, but I'll try to summarize it here. Thinking about the companies that are most directly affected, I think Canadian Solar, which is a large manufacturer of solar panels and energy storage, and they really largely target the utility market, but also residential is definitely a loser here. In the near term Sunrun, its business model is tied to these tax credits as an installer and to some degree, First Solar is also going to be affected. I don't think there's really any winners out of this when it comes to solar. But I think Enphase is probably still in a better position in the market may believe. Maybe First Solar as well. It's been through these battles before, and it has been a winner over the long term. If you look at wind, GE Vernova has been on a huge run. I love that business, but I don't love the stock right now. Tesla, I think maybe one of the bigger losers that investors haven't really considered. Last fiscal year, it earned 2.76 billion in revenue from regulatory credits. That's largely pure profit. Then there's also the loss of those EV tax credits for buyers. That might be offset from some incentives for US made autos that are part of the bill now that were part of the law, but I think this puts Tesla in a tougher spot. The tailwinds are not favorable for fossil fuels before this. This doesn't really change any of that. There's opportunities there, but not because of the law.

Matt Frankel: The reason I asked about nuclear a minute ago is because that's really what I see as the big winner here. I like some of the nuclear focused utility providers. Constellation Energy is one that comes to mind. One of their stated goals is to have the largest carbon free nuclear power fleet in the US by 2040. Jacob Solutions, they provide consulting and design services to the industry. Ticker symbol is J, so it's really easy to remember. They recently had some really big nuclear contract wins. I'm going to push back on Jason's Tesla as a big loser. One, they're American made cars. They qualify for that new auto loan interest deduction, so that could help offset what they're losing from the EV tax credits. They have a big energy storage business, and AI has not only giant power demands, but very variable power demands, and it's going to create a lot of need for large scale energy storage, and Tesla does that. I think they're worth watching.

Jason Hall: That's the one part of Tesla's business that's done extraordinarily well. Over the past few years, as the EV business has weakened, is that the battery business.

Anand Chokkavelu: Now quickly the big question, is solar still investable, Jason?

Jason Hall: I think so. We have a very US centric view, obviously, and the US is a massive important market for solar. But you look around the world and the regulatory environment is still largely favorable. I think if you're willing to write out plenty of volatility, that global opportunity is still really good. Businesses like Enphase, businesses like First Solar that have been through these battles before, and even a Canadian Solar, where it has a ton of projects that it's been funding to build on its books that the math just got changed for them in some big ways. The valuation is so cheap that I think that there's some opportunity there.

Matt Frankel: Taking a step back, the reason you have incentives for solar energy, for EVs, for all this, is because without them, they're not price competitive with the existing technologies. The gap has narrowed significantly, especially in solar over the past say 10 years as to the efficiency of the products themselves and just how much they cost. Eventually, solar is going to be able to stand on its own without incentives. But like Jason said, you have to be able to write out some volatility because that could be five years, that could be 10 years, that could be 20 years so eventually, it won't matter.

Anand Chokkavelu: After the break, we'll move from solar to something else that gets its power from the yellow sun. Stay right here. This is Motley Fool Money.

Welcome back to Motley Fool Money. I'm Anand Chokkavelu, here with Jason Hall and Matt Frankel. One of our Brothers Discovery's much anticipated latest reboot of Superman hits theaters on Friday. Hoping the Justice League can one day catch Disney's Marvel cinematic universe and hot on the heels of last week's Jurassic World Rebirth from Comcast. In honor of Summer movies, we're going to rank those three companies based on the value of their intellectual property. We'll throw in Netflix for good measure. Its headline this week was stating that half of its global audience now watches anime. Chokkavelu household certainly does with one piece. My kids have gotten me into it. For those unfamiliar, they have more episodes than the Simpsons. Matt, once again, your four choices are Warner Brothers Discovery. That includes the DC Universe, Superman, Wonder Woman, Green Lantern, Harry Potter, the Matrix, Looney Tunes, all our favorite HBO shows. You got Comcast with Shrek, Minions, Kung Fu Panda. You got Disney with Marvel, Star Wars, Pixar and Mickey Mouse. Finally, you got Netflix with things like Stranger Things, Bridgerton, Squid Game, newer Adam Sandler movies, and tons of niche content. Mentioned anime, you could argue whether that's niche content or not at this point. Whose intellectual property do you most value, Matt?

Matt Frankel: See, I said Disney. All four of these have excellent intellectual property, and I'll give you a more elaborate description there. In my household, you mentioned your household, how you have all these streaming things. We have a streaming service from all four of these. We have the Peacock service, which is a comcast product. We have HBO Max, which is a Warner Brothers discovery product. We have Disney Plus, and we have Netflix. Disney Plus also has Hulu attached to it. I ask myself, which is the least dispensable? I could cancel all the other ones before I'd be allowed to cancel Disney Plus for the other members of my household. Their film franchises are beyond compare. They have a much longer history of building intellectual property than all of these, especially in terms of valuables. Mickey Mouse is so old, it's not even intellectual property anymore. It's over 100-years-old, so I think it's actually in the public domain now. I have to say Disney, although it's a lot closer than I would have thought a few years ago.

Jason Hall: Yeah, if you had have asked me a few years ago, I absolutely would have said Disney, but I'm going to give the advantage to Netflix here. Let me contextualize that. I think the total value of Disney's IP is probably higher, but Netflix's ability to monetize it more effectively all over the world, I think, is even better than Disney's. I don't think any of these businesses in their studios have done a better job of making content that's relevant in more markets around the world than Netflix does. Let's be honest, I was able to watch Happy Gilmore with my eight year old son this weekend and I watched that on Netflix, that's bridging generations right there.

Anand Chokkavelu: Three things. One, Chokkavelu household is very excited for Happy Gilmore, too. Even my wife is in on it. Two, the Steamboat Willie era, Mickey Mouse is free to the world. The other ones aren't. I'm glad I'm not the only one with way too many streaming services, Matt. Let's talk about Last Place. Who are you cutting first, Matt?

Matt Frankel: Well, all those streaming services are still less than I was paying for direct TV a few years ago, so I think I'm doing all right. For me, the last place, it was between Comcast and Warner Brothers Discovery, both of which have amazing intellectual property, just to show you what a tight race this is. Comcast has universal. I was just in Orlando, and the universal theme parks are massive down there. But I have to put Comcast in last place. Just because Warner Brothers, I think the HBO Max acquisition was such a big advantage for them. They have some of the most valuable television assets of all time. More people watch the sopranos now than they did when it was originally on TV. It's a very valuable valuable asset, Game of Thrones. All these HBO shows that are among the highest rated shows of all time are part of their library. In addition to their film studio and all the other assets that we can't name because it's not that long of a show. I'd have to give Comcast last place, although, like I said, there's a good argument to be made for most of these to be in the top one or two.

Jason Hall: Yeah, I think that's fair. I agree with Matt that Comcast is the Number 4 here. But I don't think that's a flaw. It's just the nature of its business. About two thirds of its business comes from its cable subscriptions and high speed Internet. It's built differently than these other companies. I think it's fine that it's a little bit smaller.

Anand Chokkavelu: I will say, just to defend Comcast a little. I was thinking about my parents live in Florida, and it's high time we bring my two boys to Disney World or something like that. Honestly, the Universal theme park, the new one with Nintendo, Mario and the Harry Potter realm, it's close. We might we might prefer that one, but just to give a little love to Comcast and Universal. Jason Hall and Matt Frankel, we'll see you a little bit later in the show, but up next, we'll talk to the founder of one of the top five networks in the world, so stick around. This is Motley Fool Money. [MUSIC].

Welcome back to Motley Fool Money. I'm Anand Chokkavelu. Dave Schaeffer is the founder and CEO of Internet Service Provider Cogent Communications. Believe it or not, Cogent's the seventh successful company Dave Schaeffer has founded. Shaffer joined Fool analysts Asit Sharma and Sanmeet Deo to discuss how it deals with customers like Netflix and Meta platforms work and what keeps him up at night.

Asit Sharma: Well, hello, fools. I am Asit Sharma and I'm joined by fellow analyst Sanmeet Deo today, and our guest is Dave Schaeffer. Dave is CEO of Cogent Communications. He's also the founder of this company founded in 1999. Dave has grown Cogent Communications into a global tier one Internet service provider. It's ranked as one of the top five networks in the world. Dave is also a serial entrepreneur. He's founded six successful businesses prior to Cogent, and foolishly, he's also one of the longest serving founder CEOs in the public markets. We're delighted to have him with us today. Dave Schaeffer, welcome.

Dave Schaeffer: Hey, well, thanks for that great introduction.

Asit Sharma: To get started, let's jump in. Dave, for our members who might be unfamiliar with the ISP or Internet service provider industry, can you just explain what Cogent does and how it makes money?

Dave Schaeffer: Yeah, sure. Cogent provides Internet access to customers and to other service providers. I think virtually everyone uses the Internet, but rarely understands how it operates. Cogent has a network of approximately 99,000 route miles of intercity fiber that circumnavigates the globe and serves six continents. We then have an additional 34,000 route miles of fiber in 292 markets in 57 countries around the world. That network is solely built for the purpose of delivering Internet connectivity. When a customer buys Internet access, what they are really buying are interfaced routed bit miles connected to other networks. If you tried to sell a customer that they would have no idea what you're talking about. The average bit on the public Internet travels about 2,800 miles. It goes through eight and a half unique routers and 2.4 networks between origin and destination. Coaching carries approximately 25% of the world's Internet traffic on its network and has more other networks connected directly to it than any other network.

Asit Sharma: Yours is a primary network. Oftentimes, we hear of middlemen carriers in between ourselves sending that bit. Let's say I'm chatting with Sanmeet over Slack, sending him some bits as we have been exchanging through the day and him receiving that. But you are, I think we can think of Cogent as being the primary fiber that is the backbone of this information communication network, is that correct?

Dave Schaeffer: That is correct. We operate two very different customer segments, roughly 95% of our traffic, but only 37% of our revenue comes from selling to other service providers. We provide Internet connectivity to 8,200 access networks around the world and about 7,000 content generating businesses. Whether it be Bell Canada, British Telecom, China Telecom, Comcast or Cox. They could be customers of Cogent on the access side, where they aggregate literally billions of end users. Then on the other side, we sell connectivity to large content generating companies like Google, Amazon, Microsoft, and Meta, where they use us as their Internet provider. The second portion of Cogent's business is selling directly to end users. That represents about 63% of our revenues, but only approximately 5% of our total traffic. Cogent is an ISP, primarily in North America, where we connect to a billion square feet of office space, where we sell directly to end users. Then globally, we sell to multinational companies, oftentimes using last mile connections from third parties.

Asit Sharma: I always like to understand how exactly the companies I'm looking at make money. For example, for Netflix or Meta, or you pick a content provider, whoever it might be, when they work with you, explain that to me how they buy? Do they buy bandwidth in a package? Do they have a contract? How does that work? When they look to you to say, hey, we want to buy some bandwidth?

Dave Schaeffer: Yeah, so typically, we will provide them connections in multiple markets around the world. They will then have a minimum commitment level, and then above that, they pay on a metered basis. The way in which we bill is megabits per second at peak load over the course of the month. We bill at the 95th percentile, which means if you have a very spiky event that lasts less than 18 hours in a month, you don't pay for that incremental bandwidth but everything below that peak utilization, you pay a bill on a per megabit basis.

Dave Schaeffer: That is the way in which any service provider, whether it be an access network like Telkom South Africa, or a cable company like Rogers in Canada would buy from us. But for our corporate customers, the billing model is very different. For corporate customers, they typically buy in end user locations, not in data centers, and they are paying us a flat monthly fee for a fixed connection that is unmetered. I think of it as an all you can eat model.

Sanmeet Deo: There is a monthly recurring revenue that you get. It's just that with your network or your content customers, it could vary based on their usage. They could dial it up, dial it down, based on, like, this week, actually, they're dropping Squid Game, so they can anticipate they're going to need a lot of bandwidth versus maybe next month, their content late is a little lower, so they won't use up as much versus the corporate customers are paying more of a recurring, not based on volume. Is that accurate?

Dave Schaeffer: Is correct, Sanmeet. Virtually all of our revenue is predictable, even for those variable usage customers, there is oftentimes a very consistent pattern to their usage, and their bills do not vary by more than a couple percent month over month.

Sanmeet Deo: Dave, let's go on to looking at a review of recent performance. 2024 was a great year for Cogent. It crossed $1 billion in annual revenue. Can you just walk us through the highlights of your key business segments, wholesale, enterprise, net-centric? What drove the performance? Also did anything about the year surprise you as you went through it?

Dave Schaeffer: Two things. First of all our Internet based business represents 88% of our revenues across all three segments. We do derive about 12% of revenues from selling some adjacent services. Those being co location in our data center footprint. Optical transport or wavelength services and the leasing out of IPV4 addresses. We did generate about $1 billion in revenue in 2024 and 2024 was a year of significant transition for Cogent. Cogent had organically grown between 2005 and 2020 as a public company with no M&A at a compounded growth rate of 10.2% per year average over that period. We also were able to experience significant margin expansion during that period, where our EBITDA margins expanded at roughly 220 basis points per year over that same 15 year measurement period. When COVID hit, our corporate segment slowed materially because people were not going to offices, and as a result, Cogent's total growth rate had decreased to about 5% and our rate of margin expansion slowed to about 100 basis points. In May of '23, we acquired the former Sprint Long Distance Network, a Sprint Global Markets Group business from T-Mobile. That business was actually in decline and burning cash. In 2024, we significantly reduced that cash burn, and we were able to begin to repurpose some of the flow Sprint assets. In order to facilitate this transaction, T-Mobile paid us in cash over a 54 month period beginning in May of '23, $700 million. In 2024, a significant milestone for Cogent was our ability to take out much of that burn from that business and to actually accelerate the decline in that acquired business, as many of the products that were being sold or gross margin negative services.

Anand Chokkavelu: As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against. Don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. See our full advertising disclosure. Please check out our show notes. Up next, we've got stocks on our radar. Stay right here. You're listening to Motley Fool Money.

I'm Anand Chokkavelu, joined again by Jason Hall and Matt Frankel. This week's been Prime Day week invented out of thin air in 2015 to boost sales. It's almost literally become Christmas in July for Amazon, and to a lesser extent, all the imitating retailers. Got me wondering. Is this the greatest feat of something from nothing marketing we've seen? If not, what's competing with it, Jason?

Jason Hall: I think it's not even something from nothing. I think they stole this idea. Christmas in July has been around literally since the 1900. I think they're getting maybe a little bit too much credit for just being a really big retailer, smart enough to say, hey, we're doing a sale when there was nothing else going on, and people were like, oh, it's a big sale. Well, people kept coming, so it just gets bigger every single year.

Matt Frankel: Before e-commerce, Jason's right, remember the Sunday paper that had all the flyers from all the stores. They'd have their semi annual sales. The President's Day weekend sales were the ones I remember that were the biggest deals ever that really were just meant to invigorate sales in a historically slow time of year. But really, this concept has been applied over and over. Think of how many tourist destinations create random festivals in the worst months to go, like, weather wise. I used to live in Key West, Florida, and the biggest party of the year is called Fantasy Fest. It was created to invigorate tourism during hurricane season. It's a concept that's worked over and over, and this is a big one.

Anand Chokkavelu: Dan.

Dan Boyd: I just wanted to jump in here and mention Father's Day and Mother's Day. Surprised that you guys didn't mention those. We're all fathers here on the podcast, so I know that we enjoy Father's Day, but, like, come on. They're nothing. They were just created to sell stuff.

Anand Chokkavelu: You're not going to mention Valentine's Day, Mr. Grinch.

Dan Boyd: Valentine's Day has somewhat historical significance with all the St. Valentine's stuff. I didn't want to go too far into it in my grumpiness Anand, but I guess we can throw that one on the fire.

Anand Chokkavelu: Speaking of Singles Day in China. The Alibaba took that cemented in the '90s. I think less commercy, but then it became more commercy. Two other things, Sears' catalog. Let's not forget. A lot of times Sears really is the Amazon before Amazon we forget about it because we see it at its late phases. It wasn't the first catalog, Tiffany, Montgomery Ward, they beat it to the punch. But when it was going, it was called the Consumer Bible. Then on a smaller scale, I'll give one more. Just shout out to Spotify rapped. They do a wonderful job inventing a thing to get us more engaged. Let's get to the stocks on our radar. Our man behind the glass, who we just recently, Dan Boyd, is going to hit you with a question. We're more likely, historically, an amusing comment. Jason, you're up first. What are you looking at this week?

Jason Hall: How about Church and Dwight? Ticker C-H-D. I don't know if we give some of these legacy consumer brands companies enough talk. What's Church and Dwight? You've probably heard of Arm & Hammer baking soda. But they also own a lot of other retail brands. You might be familiar with Orajel, if you've ever had a sore tooth or you have a baby that kind of thing comes up. They own Trojan, which is another brand that people might be familiar with. But here's my personal. Right now, I have a cold. I'm living and functioning off of Zicam. That's a Church and Dwight product that's really getting me through. Over the long term, it's been a great investment. Over the past 10 years, the stocks returned about 10.5% in total returns. That's underperformed the market, but it's better than the market's long term average. I think there might be something there.

Anand Chokkavelu: Dan, a question about Church and Dwight?

Dan Boyd: Not really a question, Anand, but more of a comment. Jason, you forgot to mention OxiClean in the Church and Dwight product catalog here as a parent of a three-year-old and a nine month old laundry is a very important thing on our house, and I don't think we could survive without that OxiClean.

Jason Hall: I will raise your three-year-old and nine month old with an eight and a half year old who plays soccer. My house runs on that stuff. I'm with you there.

Anand Chokkavelu: Matt, what's on your radar?

Matt Frankel: Well, now what's on my radar is the OxiClean that I have in the closet right there. But as far as the stock, I'd have to say SoFi. Ticker symbol S-O-F-I. Fantastic momentum. They've done a great job of creating capital white revenue streams in recent years. The growth is actually accelerating. They recently announced they're bringing crypto back to their platform now that the banks are allowed to do so. That's going to be a big driver. Not only crypto, they're going a step further. They're going to start bringing blockchain facilitated money transfers across border for free. They have lots of big plans. They recently started doing private equity investing for everybody. Guys like you and me can invest in companies like SpaceX and OpenAI that are pre IPO through SoFi's platform through venture funds. There's a lot going on in this business, and it's still a relatively small bank, and they aim to be a Top 10 bank within the next decade.

Anand Chokkavelu: Dan, question about SoFi.

Dan Boyd: Well, absolute F to name. SoFi, just terrible. I feel like smart people like them could have come up with something better, but private equity investing is very interesting, Matt, though a little scared to me without the reporting regulations that public companies have to do.

Matt Frankel: I do think it was a natural thing, though, now that all these companies are waiting longer than ever to go public. SpaceX is a massive business. OpenAI has a, $100 billion plus valuation. There's a lot to like there and a lot of potential.

Anand Chokkavelu: Dan, which company you're putting on your watch list, OxiClean or private equity stuff.

Dan Boyd: I'm going to go with Church and Dwight for some of that beautiful OxiClean.

Anand Chokkavelu: That's all for this week. See you next time.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Anand Chokkavelu, CFA has positions in Alphabet, Amazon, First Solar, Microsoft, Netflix, Salesforce, SoFi Technologies, Walt Disney, and Warner Bros. Discovery. Asit Sharma has positions in Amazon, Digital Realty Trust, Microsoft, Nvidia, Salesforce, Upstart, and Walt Disney. Dan Boyd has positions in Amazon and Walt Disney. Jason Hall has positions in Brookfield Asset Management, Brookfield Infrastructure, Brookfield Renewable, Enphase Energy, First Solar, Nvidia, SoFi Technologies, Upstart, and Walt Disney and has the following options: short January 2026 $27 calls on SoFi Technologies, short January 2027 $32.50 puts on Upstart, and short January 2027 $40 puts on Enphase Energy. Matt Frankel has positions in Amazon, Brookfield Asset Management, Digital Realty Trust, SoFi Technologies, Upstart, and Walt Disney and has the following options: short December 2025 $95 calls on Upstart. Sanmeet Deo has positions in Alphabet, Amazon, Netflix, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Brookfield Asset Management, Constellation Energy, Digital Realty Trust, Equinix, First Solar, Meta Platforms, Microsoft, Netflix, Nvidia, Salesforce, Tesla, Upstart, Walt Disney, and Warner Bros. Discovery. The Motley Fool recommends Alibaba Group, Brookfield Renewable, Comcast, Enphase Energy, Ge Vernova, and T-Mobile US and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Key Points

• The Schwab U.S. Dividend Equity ETF is a popular choice for retirees.

• The ETF holds a number of Dividend Kings, which have raised their dividends each year for at least half a century.

• The fund is less volatile than the S&P 500.

• 10 stocks we like better than Schwab U.S. Dividend Equity ETF ›

If you're looking for ETFs, a good first stop is typically an S&P 500 index fund.

After all, the benchmark index includes 500 of the largest American companies across every industry, and it has a track record of delivering an annual average return of 9% over its history. However, retirees often need more stability than what the S&P 500 offers, which is why they tend to seek out lower-risk investments such as dividend stocks and bonds.

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One popular choice among dividend investors is the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD). The fund's goal is to track as closely as possible the Dow Jones U.S. Dividend 100 Index, which offers a high yield and quality screen that should be very attractive to retirees.

What's in the Schwab U.S. Dividend Equity ETF?

With net assets of $68 billion, the Schwab U.S. Dividend Equity ETF is one of the larger ETFs available to investors. It has a low expense ratio of just 0.06% and holds 100 stocks as of this writing.

The biggest sector in the ETF is energy, which makes up 21.1%, followed by consumer staples at 19.1% and healthcare at 15.7%. Companies in all three of those sectors are well known for often paying dividends.

Currently, the top three holdings are Texas Instruments, Chevron, and ConocoPhillips. Each stock represents about 4.3% of the fund as of this writing, and they're are solid dividend payers. Texas Instruments offers a 2.6% dividend, while ConocoPhillips and Chevron pay 3.5% and 4.8%, respectively. The Schwab U.S. Dividend Equity ETF itself pays a dividend yield of 4.0%, which is significantly better than the S&P 500's 1.2%.

How has the Schwab U.S. Dividend Equity ETF performed historically?

The Schwab U.S. Dividend Equity ETF has a solid track record of generating positive returns, but it has underperformed the S&P 500 since its inception in 2011, as you can see in the chart below.

Data by YCharts.

However, the chart also shows how the Schwab U.S. Dividend Equity ETF is less volatile than the S&P 500. In 2022, when the S&P 500 suffered through a bear market, the Schwab ETF experienced a more muted pullback because it lacks exposure to the high-profile tech stocks that soared during the pandemic and then crashed in 2022.

This reduced volatility is yet another reason for more conservative investors and retirees to consider the Schwab ETF.

Is SCHD right for you?

For retirees and others looking for a safe dividend ETF, the Schwab U.S. Dividend Equity ETF looks like a good bet.

There are other dividend ETFs available, but SCHD has emerged as one of the most popular choices thanks to its diversification across sectors and a track record of growth balanced with stability. Add to that the high yield and low expense ratio, and it becomes clear why this Schwab ETF is a great starting point for retirees.

Should you invest $1,000 in Schwab U.S. Dividend Equity ETF right now?

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Key Points

• The market may be entering a period of subpar performance for growth stocks.

• Safer, income-oriented holdings may be on the verge of a market-beating phase.

• This may be a good time to invest in companies that are more off the beaten path.

• 10 stocks we like better than Schwab U.S. Dividend Equity ETF ›

Want to beat the market? Most investors do. It's just easier said than done. Indeed, the risk and effort needed just to attempt to outperform the market can easily result in your underperforming it. That's why plenty of investors are content to merely match the stock market over the long term by buying and holding index funds.

Every now and then though, it makes sense to rethink the strategy of simply investing in the market as a whole or owning its obvious leading names. This may be one of these times.

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That was the key takeaway from a recent interview with The Motley Fool's co-founder and CEO Tom Gardner. "If you're looking for good returns over the next three to five years that beat the market," he said, "I think you need to look where others aren't looking right now." And he's right.

The question is, what does this mean in practical, actionable terms for the average investor? To answer that, it's helpful to first look three to five years back in time, and then, look back a bit further.

Not the long-term norm

As it is in life, the one constant in investing is change. The way things are now isn't the way they were in the past, nor is it the way they'll be in the foreseeable future. One only has to look back over the past few years to see it.

The so-called "Magnificent Seven" stocks (and their close peers) that have performed so brilliantly since 2020? They weren't exactly superstars in the years prior. Apple was hit-and-miss between 2012 and 2016, for instance, against a backdrop of slowing iPhone sales. Nvidia shares, which soared in the mid-2010s, were wrecked in 2018 when the crypto-mining craze cooled off. Meta Platforms (then Facebook) and Tesla performed equally inconsistently during the half-decade leading up to 2020, even if for different reasons.

But all of these powerhouses happened to benefit from a confluence of events: the explosion of artificial intelligence, rising interest in electric vehicles, and even demand driven by the advent of the COVID-19 pandemic. And due in part to their size, the raw strength of those few companies set the bullish tone for the rest of the market.

AAPL data by YCharts.

That upward push wasn't particularly healthy or sustainable, however. Indeed, it has arguably been unhealthy, by virtue of the lack of overall contribution to it by a broader group of stocks.

For perspective, the S&P 500's seven biggest names today account for roughly one-third of its total value. Most of "the market's" bullishness in recent years was propelled by the aforementioned Nvidia and Meta, along with Microsoft and Amazon -- their far-above-average gains had an exaggerated impact on the S&P 500's performance specifically because they make up such large portions of the cap-weighted index.

To further clarify this, while some of these megacap stocks may now be back to record highs thanks to their big recovery from April's lows, fewer than a tenth of the S&P 500's constituents are actually in record-high territory. Nearly half of the index's tickers are still in the red for the year, in fact.

In short, the S&P 550 -- our most common proxy for the market -- has performed well for a while now thanks almost entirely to the gains of a handful of growth stocks in an environment that firmly favored them. That sort of cyclical dynamic can't be expected to last forever.

Here comes the cyclical shift

So now what?

Broadly speaking, some of the key conditions that tend to move growth stocks out of favor are already in place. Interest rates are higher and the economy has shifted to a slower-growing -- even if stable -- scenario. It's worth adding that the mania for artificial intelligence is finally settling down, with no obvious new trends on the horizon to stoke unchecked bullishness. Previous manias like electric vehicles and renewable energy aren't apt to be renewed either.

Ergo, without anything new or exciting enough to make investors ignore companies' lack of profits or outrageous valuations, Gardner believes "you need to look for dividend payers, more value-oriented investing," which rewards basic attributes like predictability and profitability. Something as simple as the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) or the Vanguard Value ETF (NYSEMKT: VTV) would fit the bill.

Picking stocks that are likely to be among the best performers for the next three to five years doesn't necessarily need to be a black-and-white, value-versus-growth affair, however.

"There are hundreds of good stocks to buy right now and own for the next five years, but they're probably not the most well-known [or] actively followed," said Gardner. "It's probably where people aren't looking. It's probably small caps. It's probably under-followed names."

Translation: Focus less on the now-struggling Magnificent Seven and FAANG components that have been considered must-have holdings for most of the past five years, and instead focus on the stocks of companies that are thriving even without the limelight.

Such businesses perhaps to consider now range from utility giant NextEra Energy to online bank SoFi Technologies to supermarket chain operator Kroger to beverage and snack powerhouse PepsiCo (which at its current share price is yielding 4.2%). These are relatively boring companies, but there's nothing boring about beating the market.

Take your time, but do embrace the change

So should this be an all-or-nothing strategic shift in your portfolio? No. Gardner is not suggesting any investor should simply upheave all of their familiar growth names and replace them with value stocks or dividend payers. Some growth stocks will perform well for the foreseeable future even if most large-cap growth stocks don't. Every prospective stock pick should still ultimately be made on a case-by-case basis based predominantly on the company's particular merits and prospects.

Investors should now be embracing a new philosophical mindset, though. Much of what has worked well in recent years -- like latching onto the market's biggest companies as they got bigger thanks to the advent of AI -- isn't apt to work as well going forward. Value stocks, dividend payers, and the more obscure stories may be better positioned to perform from here. Be sure to adjust your portfolio accordingly.

Should you invest $1,000 in Schwab U.S. Dividend Equity ETF right now?

Before you buy stock in Schwab U.S. Dividend Equity ETF, consider this:

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Key Points

• Realty Income weathered some tough headwinds over the past five years.

• But it continued to raise its dividend as its AFFO increased.

• It might not consistently beat the market, but it’s still a great long-term buy.

Realty Income (NYSE: O), one of the world's largest real estate investment trusts (REITs), is often considered a dependable income investment. It sports a forward yield of 5.6%, it pays its dividends monthly, and it's raised its payout 131 times since its IPO in 1994.

As a REIT, Realty Income must distribute at least 90% of its pre-tax income to its investors as dividends to maintain a favorable tax rate. It leases its 15,621 properties to 1,565 different clients in over 89 industries in the U.S., U.K., and Europe, and its occupancy rate has never dipped below 96%. It's also a capital-light triple net lease REIT -- which means its tenants need to cover their own property taxes, insurance premiums, and maintenance fees.

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Over the past five years, Realty Income's stock price fell about 3%. Like many other REITs, it struggled in 2022 and 2023 as rising rates made it more expensive to purchase new properties, stirred up macro headwinds for its tenants, and drove some of its income investors toward risk-free CDs and T-bills. But if we include its reinvested dividends, it still delivered a total return of 25%. So will Realty Income's stock rally over the next five years as interest rates decline, or does it face other unpredictable challenges?

What happened to Realty Income over the past few years?

Realty Income merged with VEREIT in 2021 and Spirit Realty in 2024. Those mergers more than doubled its number of properties from 2020 to 2024, but it still maintained a high occupancy rate as it grew its adjusted funds from operations (AFFO) and dividends per share.

Metric	2020	2021	2022	2023	2024
Total year-end properties	6,592	10,423	12,237	13,458	15,621
Year-end occupancy rate	97.9%	98.5%	99%	98.6%	98.7%
AFFO per share	$3.39	$3.59	$3.92	$4.00	$4.19
Dividends per share	$2.71	$2.91	$2.97	$3.08	$3.17

Data source: Realty Income.

Some of Realty's top tenants -- including Walgreens, 7-Eleven, and Dollar Tree -- struggled with store closures over the past few years. However, stronger tenants like Dollar General, Walmart, and Home Depot consistently offset that pressure by opening new stores.

Realty Income still doesn't generate more than 3.4% of its annualized rent from a single tenant, and it locks its tenants into long-term leases with an average term of nearly 10 years. That diversification and stickiness insulates it from economic downturns.

What will happen to Realty Income over the next five years?

Over the next five years, Realty Income will likely expand in Europe to curb its dependence on the U.S. market. Unlike its leases in the U.S., most of its European leases are tethered to the consumer price index, which allows it to raise its rent to keep pace with inflation. It will likely ramp up its investments in data centers to profit from the secular growth of the cloud and AI markets, and scoop up more properties at favorable prices in sale-leaseback deals (in which businesses sell their own real estate and lease it back to cut costs). It could also expand into more experiential markets -- like gyms, resorts, and restaurants -- to further diversify its portfolio.

Realty still generates most of its rental income from the retail sector, but those tenants should face fewer headwinds as inflation subsides and interest rates decline. Lower interest rates should also make CDs and T-bills less attractive and drive more investors back toward REITs.

From 2019 to 2024, Realty Income grew its AFFO at a CAGR of nearly 5%. If it continues to grow its AFFO at a CAGR of 5% from 2024 to 2030 -- and still trades at 14 times its trailing AFFO -- its stock price could rise 33% to about $77 within the next five years. It should continue to raise its dividends and stay within its historical yield of 4%-6%.

So while Realty Income might not consistently beat the S&P 500 -- which has delivered an average annual return of 10% since its inception -- it should remain a stable investment for investors who need a reliable stream of monthly income. That's why I personally own shares of Realty Income, and why I think it's a solid long-term play.

Should you invest $1,000 in Realty Income right now?

Before you buy stock in Realty Income, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Realty Income wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $699,558!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $976,677!*

Now, it’s worth noting Stock Advisor’s total average return is 1,060% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 30, 2025

Leo Sun has positions in Realty Income. The Motley Fool has positions in and recommends Home Depot, Realty Income, and Walmart. The Motley Fool has a disclosure policy.

Key Points

• SCHD and GCOW focus on higher-yielding dividend stocks.

• The ETFs have different strategies for selecting those stocks.

• They also have different fees and return profiles.

Many exchange-traded funds (ETFs) focus on holding dividend-paying stocks. While that gives income-seeking investors lots of options, it can make it difficult to know which is the best one to buy.

The Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) and Pacer Global Cash Cows Dividend ETF (NYSEMKT: GCOW) are two notable dividend ETFs. Here's a look at which is the better one to buy for those seeking to generate passive income.

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Different strategies for selecting high-yielding dividend stocks

The Schwab U.S. Dividend Equity ETF and the Pacer Global Cash Cows Dividend ETF aim to provide their investors with above-average dividend income by holding higher-yielding dividend stocks. The ETFs each hold roughly 100 dividend stocks. However, they use different strategies to select their holdings.

The Schwab U.S. Dividend Equity ETF aims to track the returns of the Dow Jones U.S. Dividend 100 Index. That index screens U.S. dividend stocks based on four quality characteristics:

• Cash flow to debt.
• Return on equity (ROE).
• Indicated dividend yield.
• Five-year dividend growth rate.

The index selects companies that have stronger financial profiles than their peers. That should enable them to deliver sustainable and growing dividends, and the Schwab U.S. Dividend ETF accordingly provides investors with a higher-yielding current dividend that should grow at an above-average rate. At its annual reconstitution, its 100 holdings had an average dividend yield of 3.8% and a five-year dividend growth rate of 8.4%.

The Pacer Global Cash Cows Dividend ETF uses a different strategy for selecting its 100 high-yielding dividend stocks. It starts by screening the 1,000 stocks in the FTSE Developed Large-Cap Index for the 300 companies with the highest free cash flow yield over the past 12 months. It screens those stocks for the 100 highest dividend yields. It then weights those 100 companies in the fund from highest yield to lowest, capping its top holding at 2%. At its last rebalance, which it does twice a year, its 100 holdings had an average free cash flow yield of 6.3% and a dividend yield of 5%.

Here's a look at how the top holdings of these ETFs currently compare:

SCHD	GCOW
ConocoPhillips, 4.4%	Phillip Morris, 2.6%
Cisco Systems, 4.3%	Engie, 2.6%
Texas Instruments, 4.2%	British American Tobacco, 2.4%
Altria Group, 4.2%	Equinor, 2.2%
Coca-Cola, 4.1%	Gilead Sciences, 2.2%
Chevron, 4.1%	Nestle, 2.2%
Lockheed Martin, 4.1%	AT&T, 2.2%
Verizon, 4.1%	Novartis, 2.1%
Amgen, 3.8%	Shell, 2.1%
Home Depot, 3.8%	BP, 2%

Data sources: Schwab and Pacer.

Given their different strategies for selecting dividend stocks, the funds have very different holdings. SCHD holds only companies with headquarters in the U.S., while GCOW takes a global approach. U.S. stocks make up less than 25% of its holdings. Meanwhile, SCHD weights its holdings based on their dividend quality, while GCOW weights them based on dividend yield. Given its focus on yield, GCOW offers investors a higher current income yield at 4.2%, compared with 3.9% for SCHD.

Costs and returns

While SCHD and GCOW focus on higher-yielding dividend stocks, their strategies in selecting holdings have a major impact beyond the current dividend income. Because SCHD is a passively managed ETF while GCOW is an actively managed fund, SCHD has a much lower ETF expense ratio than GCOW. SCHD's is just 0.06%, compared with GCOW's 0.6%. Put another way, every $10,000 invested would incur $60 in management fees each year if invested in GCOW, compared with only $6 in SCHD.

GCOW's higher fee really eats into the income the fund generates, which affects its returns over the long term. The fund's current holdings actually have a 4.7% dividend yield, whereas the fund's latest payout had only a 4.2% implied yield.

ETF	1-Year	3-Year	5-Year	10-Year	Since Inception
GCOW	11.2%	8.4%	15.5%	N/A	8.8%
SCHD	3.8%	3.7%	12.2%	10.6%	12.2%

Data sources: Pacer and Schwab. Note: GCOW's inception date is 2/22/16, while SCHD's is 10/20/11.

GCOW has outperformed SCHD over the past five years. However, SCHD has delivered better performance over the longer term. That's due to its lower costs and focus on companies that grow their dividends, which tend to produce the highest total returns over the long term.

SCHD is a better ETF for passive income

SCHD and GCOW hold higher-yielding dividend stocks, making either ETF ideal for those seeking passive income. However, SCHD stands out as the better one to buy because of its focus on dividend sustainability and growth. It also has a much lower ETF expense ratio. So it should provide investors with an attractive and growing stream of passive dividend income.

Should you invest $1,000 in Schwab U.S. Dividend Equity ETF right now?

Before you buy stock in Schwab U.S. Dividend Equity ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Schwab U.S. Dividend Equity ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $692,914!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $963,866!*

Now, it’s worth noting Stock Advisor’s total average return is 1,050% — a market-crushing outperformance compared to 179% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 30, 2025

Matt DiLallo has positions in Chevron, Coca-Cola, ConocoPhillips, Gilead Sciences, Schwab U.S. Dividend Equity ETF, and Verizon Communications. The Motley Fool has positions in and recommends Amgen, Chevron, Cisco Systems, Gilead Sciences, and Texas Instruments. The Motley Fool recommends BP, British American Tobacco, Equinor Asa, Lockheed Martin, Nestlé, Philip Morris International, and Verizon Communications and recommends the following options: long January 2026 $40 calls on British American Tobacco and short January 2026 $40 puts on British American Tobacco. The Motley Fool has a disclosure policy.

In this podcast, Motley Fool Chief Investment Officer Andy Cross and contributor Jason Hall discuss:

• Why Nike stock rallied after its latest earnings report.
• Home Depot buying GMS for $5.5 billion.
• Will F1: the Movie drive Apple's stock?

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

A full transcript is below.

Should you invest $1,000 in Nike right now?

Before you buy stock in Nike, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nike wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $692,914!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $963,866!*

Now, it’s worth noting Stock Advisor’s total average return is 1,050% — a market-crushing outperformance compared to 179% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 30, 2025

This podcast was recorded on June 30, 2025.

Andy Cross: Nike is back in the race, Motley Fool Money starts now. Welcome to Motley Fool Money. I'm Andy Cross, joined here by Motley Fool contributor Jason Hall. On the docket today are earnings from Nike, Jason, Home Depot's latest acquisition, and we're lifting the hood on F1 The Movie and what it means for Apple. Jason, let's dive right into it. Nike's fourth quarter earnings were last week. The stock jumped 15% on that Friday after the footwear giant expressed confidence that it's turn around, that Elliott Hill, the CEO, who joined eight months ago, is moving along even though the quarter continues to show that challenge. Jason, is that investor enthusiasm warranted?

Jason Hall: Honestly, I think I would have framed it in a different way. The stock jumped on earnings, but if you look over the past five years, Nike stock has fallen after earnings far more often than it's gone up. The stock's still down a quarter from where it was five years ago, and it's down almost 60% from the high. I don't think this is about enthusiasm as much as it is investors reframing and resetting their expectations, and seeing the company with those lower expectations and the fact that this turnaround is going to take a while, there are some signs that it's starting to work.

Andy Cross: Jason, the sales down 12% year over year, still ahead of some estimates, earnings per share were down 86%, beating consensus a little bit. The big thing was on the gross margins down 440 basis points to 40%. If you look a few quarters ago, gross margins were around 45%. We're seeing this impact on the inventories for Nike. I think that's a big story that investors are focused on with this turnaround.

Jason Hall: There's no doubt about it. One of the big parts of the Nike struggles over the past few years is trying to figure out their go-to-market strategy. They heavily prioritize their own digital channels, alienated a lot of the wholesale market, which is the retail channel, and they're having to come back around to that, a little bit with hat in hand, and they're starting to see a little bit of signs of improvement. We know that Dick's big acquisition that they're working on. With Foot Locker, that hopefully is going to be positive for Nike. Maybe the big thing is the e-commerce presence of finally accepting that they need to be part of the Amazon ecosystem. There's some limited release products that are going to be showing up there this fall. Those are things that the market wants to see. The company has to embrace customers wherever they are, and then try to have a little bit of exclusivity with its own e-commerce. I think that that's a successful formula. I think the market agrees too.

Andy Cross: One thing, Jason, about their five "Win Now" principles, which is they're like, right now we are focused on Elliott Hill. Again, coming back in, he's a long term veteran, joined about eight months or so ago, trying to get the branding back for Nike Build Back, the Nike goodwill, focus on things like culture, product, marketing, the ground game being, as you were saying, where customers are on the ground, focusing in key sports, rightsizing those important brands that have those legacy brands. What I really like is they're restructuring the team and the whole focus back around sport chase, and they're focused back on cross-functional teams focused on specific sports. I think that is a really important focus for this Nike turnaround. While we're not seeing it in the earnings or the performance right now, I think that, what I consider enthusiasm, and I think the stock is actually pretty attractive here, even after that jump, I think the enthusiasm is warranted because of the way that Elliott Hill is going about refocusing the Nike brand, and importantly the Nike culture.

Jason Hall: I think that's right. Focusing on the brand, I'll start there. I've talked to a ton of people across sports that say that a lot of Nike's success right now is selling things that they were selling 30 years ago. Obviously, it's not exactly the truth, but it feels that way. They've certainly lost their innovative edge against on running other brands that have taken share, and having that hyper focus back on the products for that individual performance for that particular sport, I think is something that Nike has not done as well with. If they can show that and say, "Look, we can still innovate. We can come out with products that are going to be better, not just the fit, but the performance," that's where Nike can reestablish itself as a leader.

Andy Cross: It's interesting. They're going to do a little bit of surgical pricing, they mentioned, tied to Amazon a little bit later this fall. They do have a big tariff impact of about $1 billion because of all the sourcing they do overseas. Although they're trying to change that, they're going to move a little bit away from China, and they think as a percentage of sales that will drop going forward, but they do still have those impacts, and it's going to show up in the gross margin over the next quarter or two. But the expectations, Jason, is that it's going to improve throughout the year.

Jason Hall: That's right. Andy, everybody in apparel and footwear is dealing with the impact of tariffs, the potential impact. That story is going to continue to be part of the background for some time to come. I'm taking all of that with a grain of salt, that I think the supply chain is probably going to look more like it did five years ago than change going forward, but the company does have to take some financial steps to make sure it's prepared for whatever happens there.

Andy Cross: Jason, how about the stock here, about $71, $106 billion market cap. You get a little dividend, 2.2%. Hopefully, bottomy on the earnings side that you look going forward are going to be meaningfully higher. Do you find this stock attractive?

Jason Hall: I do. I did a video for the Motley Fools website a couple of weeks ago, and I said that there were signs that the turnaround was working. We'd get more information once earnings came out, and they just did. Again, probably things are going to maybe take a little longer than we expected, but I think even with the stock up from where it was a couple of weeks ago, I think there are definitely signs that it's worth maybe starting a position, following things out in. It's not super cheap right now, but I think if the trend continues under Elliott's leadership, then this is going to work out to be a good price.

Andy Cross: Certainly not on current earnings, but hopefully on the future earnings.

Jason Hall: Exactly.

Andy Cross: In agreement there, I think Nike looks attractive here. After the break, Home Depot go shopping. You're listening to Motley Fool Money. Specialty building products distributor GMS is up about 11% today after announcing that Home Depot had won the bidding battle to acquire the company for 5.5 billion. Jason, GMS has been on the auction block probably for the past month or so since QXO, another building products supplier and technology company, put out an offer for about $95 per share. Home Depot's paying $110 per share. Did Home Depot win the acquisition battle here but lose the capital allocation war?

Jason Hall: I think that's the question that I have. Home Depot, about a year ago, got into the distribution business that I think dropped $18 billion to buy a distributor, and part of the long term strategy was, look, this is an area we can consolidate, and these are builders and customers that are not coming into Home Depot no matter how well we work with them. It's big distribution. The plan had been to do that. Now, at the same time, you mentioned QXO, so that's Brad Jacobs. Brad Jacobs is the M&A master. This is somebody that has build a career on multibagger businesses, that he's made a lot of people a lot of money finding industries that are ripe for consolidation, that are low tech, that a layer of technology can make a tremendous amount better. QXO fired the opening salvo, as you said, with an unsolicited offer to buy GMS. Then Home Depot, we hear is getting involved. The question that I'm going to continue to ponder is, did Home Depot win it, or did Brad Jacobs and team just walk away because it got too pricey for them? If you look at the numbers, I believe 10 or 11 times EBITDA. Not crazy expensive, but certainly more expensive than the discipline price you would see a Jacobs-run business want to pay.

Andy Cross: Sorry, about one times sales, as you mentioned, 10 to 11 times EBITDA. EBITDA's been down a little bit for the past year or so, but also because of the housing market, we know. But GMS, which by the way stands for Gypsum Management and Supply, runs 320 distribution centers selling things, including things like wallboard and ceilings, steel framings. It runs about 100 tool sales, rental, and service centers. Together, you're going to put together 1,200 locations, 8,000 trucks, making tens of thousand deliveries to job sites every day. What I like, Jason, as you mentioned, is these acquisitions for distribution scale matters, and this is a very fragmented business. I see this acquisition by Home Depot, this is a 5.5 billion dollar acquisition by Home Depot. Home Depot is a massive company, so Home Depot has about 45 billion of debt on the balance sheet. It's not going to add a ton more debt to the account. They have a $1.5 billion of cash, almost. I think from a management perspective, it's fairly attractive to Home Depot, and I can see why GMS would choose Home Depot versus QXO, even with Brad Jacobs' intelligence. But it does see when I look at the ability for Home Depot get a little bit more from every distribution node. I think it's attractive, and that multiple, as you mentioned, for Home Depot, I think, is not all that high. I think they're getting a good deal here.

Jason Hall: I think it probably works out so long as this remains a part of the strategy for Home Depot consolidating this fragmented distribution industry that's very different from its retail business. I will also make a prediction that Brad Jacobs and QXO made a big splash when they acquired Beacon Roofing as the first, looks like, $11 billion deal, so getting in the roofing business, one of the big roofing suppliers. My prediction is that we're going to see Home Depot and its distributor segment and Brad Jacobs' QXO going head to head on more acquisitions over the next 5-10 years, and probably both do well in consolidating because there's so much room to consolidate this market.

Andy Cross: That's the thing. It's so fragmented, so I think they can both be winners here. Brad Jacobs, if you look at his acquisition or look at his history of running companies with XPO and others, have done very well over the years. Like you said, he has this down to a science, the Beacon Roofing acquisition. That SRS acquisition by Home Depot, as you mentioned, for a little bit more than $18 billion, got them back into the distribution game, and so they're trying to cobble up that together. Both of these companies are trying to serve the contractor market, which is, as we mentioned, very fragmented, trying to increase the value of that network. For Home Depot, I think it's a good acquisition, I think, at a reasonable price, and I think Brad Jacobs was like, "Listen, there's going to be other opportunities. I'll let this one go. Home Depot, you can take this, and I'll focus my attention elsewhere." I do have a question, Jason, which is, if you think about either Home Depot stock or QXO stock, obviously GMS is going to be, if it all goes through, part of Home Depot, is there anyone that stands out as more attractive to you?

Jason Hall: There's my answer, and then there's the answer that people listening need to think about individually. For me, I think QXO is really attractive because I'm a big believer in Brad Jacobs and the track record, and the process when it comes to being disciplined and finding these industries to consolidate, starting from a really small size, this can be a massive compounder. Now, again, that's what I'm looking for. I think investors that are looking for maybe the higher floor of an industry dominant leader, like a Home Depot, that has a pretty solid dividend growth, and can continue to do well for investors over time, if you want something that's a little more stable, a little less volatile, then I think Home Depot's a pretty compelling investment right here. What about you? What do you think?

Andy Cross: Well, QXO at $14 billion, I think the upside is a lot higher. I own Home Depot, it's a large position in my portfolio. The stock hasn't done all that well over the past year or so. I think this is a nice bolt-on acquisition for them. Doesn't add a ton more goodwill to the balance sheet, maybe 2.5 billion or so on top of their 20 billion they have. I think it's reasonable. I think it's a decent price. I think they'll be able to get more out of it and continue to grow the GMS side of the business tied to SRS. It's just that Home Depot, like you said, is probably the high single digit per year grow or not, one that's going to light anything on fire going forward, Home Depot that is.

Jason Hall: Well, their leverage is there is going to be buying back shares. That's how you boost per share return there too.

Andy Cross: A hundred percent. Coming up next on Motley Fool Money, will F1 The Movie drive Apple stock higher? You're listening to Motley Fool Money. Brad Pitt's new movie F1, made by Apple Original Films, hit the theaters this weekend to positive reviews and decent amount of money, Jason. But here's my question, why is a $3 trillion company like Apple focused so much on making a film like F1, even with Brad Pitt.

Jason Hall: Because they can. They found the money on the couch cushions, and they saw it like a fun vanity project.

Andy Cross: They don't want to buy back more stock, and they've got plenty of places to invest that capital.

Jason Hall: In all seriousness, we're both being a little bit glib here, and it's Apple TV+, and their studios business has actually created some exceptionally high quality content. It's still a bit of an also ran, compared to the big players in the space, like the Netflixes of the world, but to me, I think it's a reminder that Apple is focusing on quality more necessarily than quantity as part of its strategy with streaming and media content real large.

Andy Cross: Does that mean the other ones are focused more on the quantity side, less on the quality side, do you think?

Jason Hall: I think a little bit both. I think all of them, there's a tension between the two, and it's where are you leveraging more toward. If you're a Netflix, for example, this is your entire business. You have to put out lots of content that's going to attract lots of people, and it's got to be very good quality. If you're an Apple, where does this fit in your entire ecosystem of things, and what you're looking to do maybe is a little bit different than say what Amazon is looking to do with Amazon Prime TV, or Amazon Prime Video, I should say. Where Apple does seem, if you look at the content that they've produced, certainly it doesn't have the volume that you see at some of these other large players, but what it does provide is an additional layer of stickiness to the platform.

Andy Cross: Do you think that they will up the quantity game to be more competitive? I think about this with Apple, right? Stories and reports are surfacing, 200 million to 300 million more on the entire cost to make this film, and Apple financed a chunk of change of that. Are you saying they have exclusive rights once it hits Apple TV? They'll be there. They splash marketing budgets all over the place. They had it in Apple stores. They had it featured in Apple Music, Apple Maps app. They had a big marketing push toward it, obviously, to show that they can be competitive in this space. I'm thinking like this, Apple generates about $400 billion or so in revenue. They generate, gosh, $100 billion in profits. Almost about a quarter or so of their business is tied to services. When I think about Apple building out that ecosystem, Jason, and the glue that they're putting together, as you mentioned, things like streaming to be competitive against likes of not just Netflix, but also the likes of Amazon, and the likes of YouTube, for a company that has middling growing, that continued growth in the services side of the business is important. I think that's one reason why they are now recognizing that because they generate such great returns on their investment, this is a place they can splash some capital.

Jason Hall: Netflix here, they want your eyes, they need you. They need as much as many people's time as they can get because this is their entire business. Amazon wants your wallet, and the bottom line is that nobody's going to cancel or subscribe to Amazon Prime just for prime video. It's a bolt-on thing that keeps you in the ecosystem and drives you there. Now, if you're Apple, think about some of the things they've done with content. One example is they own the rights to the Charlie Brown content. Think about Ted Lasso, shows like this. I think where Amazon wants your wallet and Netflix wants your eyes, Apple want your heart. They want you drawn to these things that you remember from your childhood. Brad Pitt headline products are very compelling. Ted Lasso, it's become a cultural touchstone. I think if they focus more on those, almost like the HBO model of the 2000s, of developing just a few really high quality contents that are strong enough to keep you attached, that's where this fits in with Apple, and where Apple can win with this. Whether this part of the business is necessarily profitable on its own basis, I think eventually they want to see that. But if it creates value for the entire ecosystem, I think that's the most important thing for Apple here.

Andy Cross: Is Apple attractive from a stock perspective? Again, I mentioned before, the growth has slowed. The stock has not been a super performer here, and now it sells in that 27-28 times earnings perspective, is with a lot of share buybacks, as you mentioned, in exceptionally profitable ways to invest, but still playing catch-up on the AI side. Is Apple attractive to you right now?

Jason Hall: Not at all. I love the business. I love the products. I'm a deep user of Apple products, and one of those people that signed up for Apple TV+ for Ted Lasso, and hasn't canceled it because there's so many other good unexpected programs that they have there. But the bigger concerns for me around a company like Apple's it's so fully valued, it's not growing. AI, I don't know that it's necessarily a concern right now, but at some point, they're trailing in that race for AI powered products, could potentially sneak up and hurt the company. They lack a real catalyst for the next leg of growth. Nothing is lined up to drive growth that would make 27, 28 times earnings or higher compelling to me. I think there's more risk of underperformance. I don't think investors are going to lose a ton of money here. There's a bigger risk of underperformance if you're making this a substantial portion of your portfolio.

Andy Cross: I agree. I think it's probably more in the money making category than adding to here. I'm an owner of it, and I'm just sitting on my shares, but not one that jumps to the top of my buy list right now, Jason. I do want to see a little bit more innovation from them, yet to come. I like the movies, but I do want to see innovation into the product cycle. That's a wrap for us today here on Motley Fool Money. Jason Hall, thanks for being here.

Jason Hall: Absolutely. This was fun. We'll do it again sometime soon.

Andy Cross: Here at Motley Fool Money, we love hearing your feedback. To be part of that feedback or just to ask a question, email us here at [email protected]. That's [email protected]. As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what we do. All personal finance content follows Motley Fool editorial standards and is not approved by advertiser. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. For all of us here at Motley Fool Money, thanks for listening. We'll see you tomorrow.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Andy Cross has positions in Amazon, Apple, and Home Depot. Jason Hall has positions in Qxo. The Motley Fool has positions in and recommends Amazon, Apple, Home Depot, and Nike. The Motley Fool has a disclosure policy.

Key Points

• Home Depot is a blue chip dividend stock long-term investors can count on.

• Nucor, UnitedHealth, and Alphabet have become too cheap to ignore.

• Criteo is a hidden-gem growth stock packed with upside potential.

The second half of the year is a great time for folks to review what companies they are invested in, why they are invested in them, and to update their watch lists with exciting stocks to buy.

However, some investors may be hesitant to put new capital to work in the market given the rapid recovery over the last few months. The S&P 500 is up more than 20% from its April lows, putting pressure on companies to deliver on expectations.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

When valuations are high, it's even more important that investors focus on quality companies that have what it takes to deliver strong returns without everything having to go right.

Here's why these Fool.com contributors believe that Home Depot (NYSE: HD), Nucor (NYSE: NUE), UnitedHealth Group (NYSE: UNH), Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), and Criteo (NASDAQ: CRTO) stand out as top stocks to buy in July.

Spring for this retailer's cheap stock

Demitri Kalogeropoulos (Home Depot): Home Depot stock has become cheaper relative to the market over the past year, and that fact should have investors feeling excited about adding the retailer to their portfolios. Sure, the home improvement giant's business hasn't been performing as well as it did through the pandemic and its immediate aftermath. Comparable-store sales (comps) in the most recent quarter were essentially flat due to a sluggish housing market. Consumers are trading down to less ambitious home improvement projects, too.

Yet customer traffic through early May was positive, rising 2% to help overall revenue improve by 9%. Those figures bode well for the chain's crucial spring selling season, when homeowners tend to spend aggressively on outdoor projects.

"We feel great about our store readiness and product assortment as spring continues to break across the country," CEO Ted Decker told investors in late May. Executives at the time affirmed their fiscal year outlook that calls for comps growth of about 1%, combined with a drop in profit margin to 13% of sales.

That decline would still keep Home Depot ahead of rival Lowe's on profitability. And cash flow remains strong enough for the chain to continue repurchasing shares and paying a robust dividend while investing in the business. The dividend yield is at 2.4%, compared to Lowe's 2%, giving investors another reason to prefer the market leader in this niche.

It could be some time before Home Depot's sales gains accelerate to above 5% again, while operating margin returns to its prior level of just over 14%. But patient investors can hold this sturdy stock while waiting for that rebound, collecting those generous dividend checks along the way.

A turnaround story in the making?

Neha Chamaria (Nucor): After I recommended Nucor in February, the stock sank to a 52-week low in April but has bounced back dramatically -- almost 33% since. Although I am a long-term investor and do not track price movements in the short term, there's a reason I brought this up here. The thesis that I saw earlier this year is playing out for Nucor, meaning the time is ripe to buy the stock if you still haven't.

President Donald Trump imposed a 50% tariff on steel and aluminum imports on June 3, up from 25% he had proposed earlier, to curb the dumping of low-cost steel by other countries and boost the domestic steel industry. Nucor CEO Leon Topalian has publicly supported Trump's tariff policies and believes some, like steel tariffs, were long overdue. Soon after the tariff announcement, his company raised the prices of hot-rolled steel coils and issued encouraging guidance for its second quarter.

After muted first-quarter numbers, the company expects second-quarter earnings to rise considerably across all its segments: steel mills, steel products, and raw materials. Steel mills, also Nucor's largest segment, are expected to report the largest growth in earnings, driven by higher average selling prices.

Overall, the company expects to report earnings between $2.55 and $2.65 per share for the second quarter versus only $0.67 in the previous quarter. Although its second-quarter earnings could still be around 5% lower year over year, this could just be the beginning of an upward earnings and sales trend.

Shares have hugely underperformed the S&P 500 over the past year or so because of declining sales and profits. With demand and prices both picking up, this could be an inflection point for Nucor stock, making it a solid long-term buy at current prices.

A blue chip stock that's a bad-news buy

Keith Speights (UnitedHealth Group): Timing the market is next to impossible. But timing can sometimes be important when buying specific stocks. I don't think there has been a better time to invest in UnitedHealth Group in years.

To be sure, this healthcare stock faces numerous problems. UnitedHealth's Medicare Advantage costs have gotten so out of hand that the company was forced to first cut its full-year 2025 guidance and then later suspend the guidance altogether. This issue seems to have played a big role in the unexpected departure of former CEO Andrew Witty.

The Wall Street Journal's article about a Justice Department (DOJ) investigation into alleged criminal fraud by the company made matters worse. To add to the healthcare giant's misery, President Trump threatened to eliminate pharmacy benefits managers (PBMs). UnitedHealth's Optum Rx ranks as the nation's third-largest PBM.

Why buy UnitedHealth Group stock amid all of this doom and gloom? Its business prospects are significantly better than its valuation reflects. After plunging more than 50%, shares trade at only 13.3 times forward earnings. But most of the headwinds the company faces should eventually wane.

For example, management expects to return to growth next year. I think that makes sense. The solution to higher-than-anticipated Medicare Advantage costs is to boost premiums. While the company has to wait to implement its higher premiums, you can bet they're coming.

Witty was replaced by former longtime CEO Stephen Hemsley, and the company should again be in good shape under his leadership. I suspect Hemsley will direct the company to issue new full-year guidance as soon as possible, which should bolster investors' confidence.

What about the DOJ investigation? It hasn't been confirmed yet. And President Trump's threats to cut out the PBM middleman? That's much easier said than done.

The bottom line is that I believe UnitedHealth Group stock is way oversold right now. This blue chip is a great bad-news buy in July.

A standout in the "Magnificent Seven"

Daniel Foelber (Alphabet): Google parent Alphabet rebounded in lockstep with the broader market last week. But it's still a compelling buy in July.

As many megacap growth stocks have compounded in value, some investors are questioning whether there's still room for these stocks to run or if valuations could limit returns. Alphabet doesn't have that problem.

The stock is so attractively priced that it is cheaper than the S&P 500 on a forward price-to-earnings basis. Whereas the rest of the "Magnificent Seven" are more expensive than the S&P 500 based on this key metric. Meaning that investors don't have the same lofty earnings expectations for Alphabet as they do for companies like Nvidia, Microsoft, or even Apple (even though Apple is growing slower than Alphabet).

To be fair, getting too bogged down by valuations has been a historically bad idea for many of today's top companies. Measuring Microsoft for its legacy software suite alone would have drastically undervalued its now huge cloud computing segment.

Amazon used to be an online bookstore turned e-commerce giant. Similarly, its cloud computing segment, Amazon Web Services, is arguably more valuable than the rest of the company combined. Nvidia used to make most of its money from selling graphics processing units (GPUs) and other solutions for gaming and visualization customers. But today, GPU demand for data centers is the company's bread and butter.

Since no one has a crystal ball, investors have to make calculated bets based on where they think a company could be headed. Looking at Alphabet, I think the company has fairly low risk for its upside potential. Part of that reasoning is that its existing assets are drastically undervalued, and investors aren't giving the company much credit for the upside potential of self-driving through Waymo, the company's quantum computing investments, or its artificial intelligence tool Gemini.

Add it all up, and Alphabet stands out as an effective way to get exposure to many different end markets at a good value.

This ad-tech expert's stock is way too cheap in July

Anders Bylund (Criteo): Sometimes I wonder what it takes to impress Wall Street's market makers. Digital advertising expert Criteo has consistently stumped analysts since the spring of 2023, but the stock is down by 39% in 2025 at the time of this writing.

I get where the market skepticism is coming from. Criteo's top-line sales have been rather slow in recent quarters. The macroeconomic backdrop isn't ideal for big-ticket marketing campaigns, since consumers are holding on to their money with an iron grip.

But the company has tightened up its operations in this uncertain economy. In May's first-quarter report, adjusted earnings rose 38% year over year while free cash flow soared from breakeven to $45 million. For a sense of scale, that's 10% of its revenue in the same quarter.

So Criteo is a cash machine when it counts, and the lessons learned in these hard times should result in solid profit gains when the economy turns sweeter.

Meanwhile, the stock is priced for absolute disaster. Shares are changing hands at 9.8 times earnings and 5.7 times free cash flow, as if the company were losing money by the truckload. The stock price is entirely inappropriate for a very profitable specialist in a temporarily downtrodden industry.

I'm tempted to double down on my Criteo holdings in July, and I highly recommend that you consider this overlooked stock while it's cheap.

Should you invest $1,000 in Home Depot right now?

Before you buy stock in Home Depot, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Home Depot wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $697,627!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $939,655!*

Now, it’s worth noting Stock Advisor’s total average return is 1,045% — a market-crushing outperformance compared to 178% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 30, 2025

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Anders Bylund has positions in Alphabet, Amazon, Criteo, Nvidia, and UnitedHealth Group. Daniel Foelber has positions in Nvidia. Demitri Kalogeropoulos has positions in Amazon, Apple, and Home Depot. Keith Speights has positions in Alphabet, Amazon, Apple, Lowe's Companies, and Microsoft. Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Home Depot, Microsoft, and Nvidia. The Motley Fool recommends Criteo, Lowe's Companies, and UnitedHealth Group and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

The secret to retiring a multi-millionaire is quite simple. There is no easier way to accomplish this than by using a consistent dollar-cost averaging strategy. If you start investing early and use this investment strategy, your odds of retiring a multi-millionaire are extremely good.

Dollar-cost averaging is one of the simplest and most effective investing strategies out there. Instead of trying to time the market, you simply invest at regular intervals, regardless of where prices are.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

By investing a fixed amount every month, or every paycheck, you'll buy more shares when prices are low and fewer shares when they're high. Over time, this will smooth out your cost basis and help protect you from big market swings. It's a disciplined approach that will keep you investing through both bull and bear markets.

Some of the best investment vehicles to use this strategy with are exchange-traded funds (ETFs). With ETFs, you can get an instant portfolio of stocks without doing a lot of research. ETFs are also very accessible. You can feel comfortable starting with a small amount -- the key is just investing consistently.

With the power of compounding, dollar-cost averaging consistently into an ETF can help you retire a multi-millionaire. You also don't have to start with a large amount. If you are in your mid-twenties and have 40 years until retirement, a simple $500 investment each month can turn into a nearly $5 million nest egg by the time you hit retirement age with just a 12% average annual return.

If you're older, though, don't fret. A $1,000 investment each month at a 12% annual return can give you a $3 million portfolio after 30 years. However, the sooner you start, the better, as $1,000 each month for 40 years turns into nearly $10 million.

Let's look at five ETFs with strong track records that can help you retire a multi-millionaire.

Vanguard S&P 500 ETF

With a 12.8% return over the past decade, the Vanguard S&P 500 ETF (NYSEMKT: VOO) is one of the first choices that investors should consider when looking to implement a dollar-cost-averaging strategy. The ETF replicates the performance of the S&P 500, which is widely considered the benchmark for the U.S. stock market.

The ETF is a nice blend of growth and value large-cap stocks, and with around 500 stocks in the fund, it gives investors instant diversity.

Vanguard Growth ETF

Growth stocks have been leading the way in the market for the better part of two decades. The Vanguard Growth ETF (NYSEMKT: VUG) is a great way to invest in this dynamic. With a 15.3% return over the last 10 years, this ETF is another solid choice for investors looking to use a dollar-cost-averaging strategy.

While the ETF officially tracks the CRSP US Large Cap Growth Index, this is essentially the growth side of the S&P 500. It's not as diversified as the S&P 500, with only around 165 stocks in its portfolio, but you're getting the best of the large-cap growth stocks through the ETF.

Invesco QQQ Trust

The Invesco QQQ Trust (NASDAQ: QQQ) has quite simply been one of the best-performing non-sector-specific or non-leveraged ETFs over the past decade. The ETF tracks the performance of the Nasdaq-100 index, which is made up of the 100 largest non-financial stocks that trade on the Nasdaq Stock Exchange. The Nasdaq has long been known as the exchange for emerging growth and technology companies, so the ETF is heavily weighted toward these types of stocks.

The ETF has generated an average annual return of 17.7% over the past 10 years, easily ahead of the return of the S&P 500 over the same stretch. Even more impressive is that it has consistently beaten the S&P 500 more than 87% of the time on a 12-month rolling basis.

Schwab U.S. Dividend Equity ETF

Investing in growth and technology stocks is not the only investment style, and the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) is a nice value investment alternative. The ETF tracks the Dow Jones U.S. Dividend 100 Index, which consists of high-yielding U.S. stocks that have long track records of consistently paying out dividends.

While the ETF has only generated a 10.6% average annual return over the past 10 years, it has produced a 12.2% annual average return since its inception in October 2011. That's a solid long-term track record.

ARK Next Generation Internet ETF

If you're looking to swing for the fences, the ARK Next Generation Internet ETF (NYSEMKT: ARKW) could be right for you. Unlike the other ETFs, it is actively managed and does not follow an index. Instead, it is focused on investing in companies "that benefit from the increased use of shared technology, infrastructure and services, internet-based products and services, new payment methods, big data, the internet of things, and social distribution and media." In addition to investing in stocks, it currently has an investment in an ETF that tracks the price of Bitcoin.

The ETF has been a strong performer, generating an average annual return of 18.2% over the past 10 years. However, you'll need a strong stomach, as the ETF has seen some wild swings over the past few years, as shown in the table below.

Year	2020 Year	2021 Year	2022 Year	2023 Year	2024 Year
Performance	157.08%	-16.65%	-67.49%	96.99%	42.27%

Data source: Ark Invest.

As such, this ETF is only for the most aggressive investors.

Should you invest $1,000 in Vanguard S&P 500 ETF right now?

Before you buy stock in Vanguard S&P 500 ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard S&P 500 ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $713,547!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $966,931!*

Now, it’s worth noting Stock Advisor’s total average return is 1,062% — a market-crushing outperformance compared to 177% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 23, 2025

Geoffrey Seiler has positions in Invesco QQQ Trust and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Bitcoin, Vanguard Index Funds-Vanguard Growth ETF, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.

For most investors, simple is good. The Schwab US Dividend Equity ETF (NYSEMKT: SCHD) is a simple way to invest in reliable, high-quality dividend stocks. After all, if you have a life to live, you probably don't want to spend all your free time poring over stocks.

A roughly 4% yield and a unique stock selection process seal the deal when it comes to this smart investment choice. Here's what you need to know today.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

What has the Schwab US Dividend Equity ETF done?

Before getting into the Schwab US Dividend Equity ETF's investment approach, it's important to get a good feel for what it has achieved. Many dividend investors are looking to create a reliable income stream to live on in retirement.

So the goal is to own investments that produce reliable and hopefully growing dividends. Of course, a secondary hope is that the investment's value will rise as well, producing some capital appreciation.

SCHD data by YCharts.

The chart above shows that dividend investors have gotten exactly what they wanted from this exchange-traded fund (ETF). The current dividend yield of roughly 4% is in line with a "rule of thumb" retirement withdrawal rate that has led many dividend investors to focus on creating a 4% yield from their portfolios.

So, with that 4% yield, investors won't feel the need to touch the principal invested in the Schwab US Dividend Equity ETF. That can help with a feeling of financial security, or provide confidence that there will be money left to hand on to loved ones someday.

All that comes from one simple investment with a tiny expense ratio of 0.06%. To be fair, the Schwab US Dividend Equity ETF has not performed as well as an S&P 500 index ETF on a total return basis. But that's not the goal of the ETF. The goal is to provide a reliable income stream with some capital appreciation, and it does that very well.

Don't buy the Schwab US Dividend Equity ETF until you read this

You shouldn't buy any pooled investment just because of a few performance statistics. Just as with any other ETF or mutual fund, you are giving your hard-earned money to the Schwab US Dividend Equity ETF to manage on your behalf. You need to make sure you understand what is being done with that cash.

In reality, the Schwab US Dividend Equity ETF is just tracking the Dow Jones U.S. Dividend 100 Index. What you really need to know is what that index does, which is actually fairly complex. First, it pulls out all the companies that have increased their dividends for at least 10 consecutive years. Then real estate investment trusts (REITs) are eliminated from consideration. This forms the starting pool from which the index is created.

But the 100 stocks that make it into the index haven't been selected yet. The next step is to create a composite score for all of the stocks that pass the first round of screening. The score looks at cash flow to total debt, return on equity, dividend yield, and the company's five-year dividend growth rate. The 100 stocks with the highest composite scores are included in the index and are market-cap weighted.

SCHD Dividend Yield data by YCharts.

There's a lot going on there, but the point is that the Schwab US Dividend Equity ETF is focused on owning well-run and financially strong businesses that have attractive yields and strong histories of dividend growth. That's likely the same type of stock a dividend investor is trying to find.

Buying the Schwab US Dividend Equity ETF gets you an entire portfolio of such investments with just one buying decision. That's simple, and it allows you to spend your time doing other things, like spending time with family or playing golf.

Smart investors look for simple solutions that work

The Schwab US Dividend Equity ETF isn't going to give you everything an investor dreams of, but no investment can do so. What it will do is provide you with an attractive income stream and, if history is any guide, slow and steady growth of capital over time. If that's your goal, it would be a smart choice to invest in the Schwab US Dividend Equity ETF today.

Should you invest $1,000 in Schwab U.S. Dividend Equity ETF right now?

Before you buy stock in Schwab U.S. Dividend Equity ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Schwab U.S. Dividend Equity ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $713,547!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $966,931!*

Now, it’s worth noting Stock Advisor’s total average return is 1,062% — a market-crushing outperformance compared to 177% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 23, 2025

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

A bidding war appears to be brewing for building products distribution company GMS (NYSE: GMS), and investors are excited by the possibilities.

Shares of GMS jumped 26% on Friday morning after the company was put in play by an unsolicited suitor.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

A building products bidding war?

GMS is a construction products distributor and tool supplier for consumer and commercial customers. Late Wednesday, QXO (NYSE: QXO) proposed acquiring the business for about $5 billion, or $95.20 per share in cash, a premium of 27% to GMS's 60-day volume-weighted average.

QXO is a roll-up put together by Brad Jacobs, the M&A specialist behind companies including XPO and United Rentals. The company did its first deal in April, acquiring Beacon Roofing Supply for $11 billion, and continues to seek out acquisition opportunities toward its goal to build a $50 billion business in the years to come.

GMS said its board would review the proposal. QXO set a deadline of June 24 for a response, saying it intends to go directly to GMS shareholders if a deal can't be worked out.

But QXO might have competition for the business. Late Thursday, The Wall Street Journal reported that Home Depot (NYSE: HD) has also made an offer for GMS. So far, Home Depot has not gone public with a bid, and it is unclear what price it is offering for GMS.

Is GMS stock a buy?

Though nothing is certain, with two deep-pocketed suitors, it appears likely that GMS's time as an independent company is nearing an end. And it is possible that, since there are two bidders, the sale will be for a higher price than the $95.20-per-share QXO offer.

The market is already pricing that in, bidding GMS shares as high as $104 on Friday morning.

Though both Home Depot and QXO have the resources to engage in a bidding war, both have smart management teams and solid strategies and seem unlikely to dramatically overpay. It is also unclear whether Home Depot was simply being opportunistic, or if the company considers GMS to be strategic enough to engage in a battle.

Given the uncertainty of the outcome and the considerable premium already priced into GMS shares, investors should tread carefully.

Should you invest $1,000 in Gms right now?

Before you buy stock in Gms, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Gms wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $659,171!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $891,722!*

Now, it’s worth noting Stock Advisor’s total average return is 995% — a market-crushing outperformance compared to 172% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 9, 2025

Lou Whiteman has positions in Home Depot, Qxo, and XPO. The Motley Fool has positions in and recommends Home Depot. The Motley Fool recommends XPO. The Motley Fool has a disclosure policy.

Exchange-traded funds (ETFs) have changed the face of investing, helping investors to conveniently simplify their lives at low cost. But there are so many ETFs at this point that it can be confusing to find the ones that are best for your portfolio. Here are four of the best dividend ETFs for your portfolio if you lean toward dividend investing.

1. Vanguard Dividend Appreciation ETF

The first ETF up is the Vanguard Dividend Appreciation ETF (NYSEMKT: VIG). It has the lowest yield here at around 1.8%. That's pretty miserly, but it is still notably higher than the 1.3% dividend yield of the S&P 500 index. The interesting overlay here is that, like the S&P 500 index, the Vanguard Dividend Appreciation ETF owns a fairly large number of stocks, with around 300 holdings.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

VIG data by YCharts.

The ETF's construction is fairly simple. The first step is to create a list of all U.S. companies that have increased their dividends annually for at least a decade. Then the highest-yielding 25% of the companies are eliminated (high yield is clearly not the focus here). The companies that are left are put into the Vanguard Dividend Appreciation ETF with a market-cap weighting.

The ETF hasn't kept pace with the S&P 500 index over time, but if you like the idea of a broadly diversified portfolio filled with stocks that have a history of regularly hiking their dividends, this could be the right ETF for you. Notably, the dividend has doubled over the past decade, which suggests that a lower starting yield can still have a big income effect if you hold this ETF for the long term.

2. Vanguard High Dividend Yield ETF

Next up is the Vanguard High Dividend Yield ETF (NYSEMKT: VYM). This exchange-traded fund is pretty simple, too. It takes all of the dividend-paying stocks on U.S. exchanges and then buys the 50% of the list with the highest yields. The portfolio is weighted by market cap. This ETF has over 500 holdings, so its portfolio is even more diversified than the Vanguard Dividend Appreciation ETF. The dividend yield is around 2.9%.

VOO Dividend Yield data by YCharts.

Given the focus on yield here, the Vanguard High Dividend ETF has lagged the S&P 500 index over time by an even greater amount than the Vanguard Dividend Appreciation ETF. But if your goal is to maximize the income your portfolio generates, it could be a great foundational investment. Essentially, these two Vanguard ETFs offer wide diversification and dividends in ways that will meet the investment needs of dividend growth investors and, in this situation, high yield investors.

3. SPDR Portfolio S&P 500 High Dividend ETF

The SPDR Portfolio S&P 500 High Dividend ETF (NYSEMKT: SPYD), meanwhile, allows you to stick with S&P 500 index stocks, but do so with a high-yield focus. It simply buys the 80 highest-yielding S&P 500 stocks, weighting them equally. Equal weighting allows each stock to affect performance to the same degree and helps to reduce the risk that any one stock will overly hamper performance. The dividend yield is an attractive 4.5%, the highest on this list.

SPYD data by YCharts.

Don't buy this ETF looking for material dividend growth over time. The dividend is going to make up a material portion of an investor's total return, but it hasn't risen much over time. However, if you want to maximize income with a hand-selected portfolio of large market capitalization and economically important businesses, the SPDR Portfolio S&P 500 High Dividend ETF should be a top contender.

4. Schwab US Dividend Equity ETF

The Schwab US Dividend Equity ETF (NYSEMKT: SCHD) is by far the most complicated ETF on this list. But it might also be the most attractive, as it manages to mix dividend growth with an attractively high yield. The process starts with the list of companies that have increased their dividends annually for 10 consecutive years. A composite score is created for each of the companies that includes cash flow to total debt, return on equity, dividend yield, and a company's five-year dividend growth rate. The 100 highest-rated companies get included in the ETF and are market-cap weighted.

SCHD data by YCharts.

The end result has been a strongly performing share price, a growing dividend payment, and, today, a roughly 4% yield. The Schwab US Dividend Equity ETF isn't the most diversified, and it isn't the highest-yielding. But it provides a very attractive mix of the two. And, interestingly, it has managed to grow its dividend at a faster clip than the Vanguard Dividend Appreciation ETF.

For many dividend investors, the Schwab US Dividend Equity ETF's approach of using a fairly complex composite score to select stocks will be the most attractive choice. That said, investors need to recognize that this ETF isn't a simple one to understand. If you don't buy into the screening approach, you probably shouldn't buy the ETF.

Dividend options for every kind of dividend investor

Everyone has a slightly different approach to investing. This quartet of dividend-focused ETFs offers up four different dividend investing styles -- from dividend growth to high yield, and a notable choice that successfully manages to bring different investment tactics into one complex and high-yielding ETF. If you are looking for the best dividend ETF for your portfolio, one of these four ETFs will likely be exactly what you are trying to find.

Should you invest $1,000 in Schwab U.S. Dividend Equity ETF right now?

Before you buy stock in Schwab U.S. Dividend Equity ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Schwab U.S. Dividend Equity ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $669,517!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $868,615!*

Now, it’s worth noting Stock Advisor’s total average return is 792% — a market-crushing outperformance compared to 173% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard Dividend Appreciation ETF and Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool has a disclosure policy.

When it comes to massive retailers, perhaps two of the businesses that immediately come to mind are Costco Wholesale (NASDAQ: COST) and Home Depot (NYSE: HD). The former specializes in selling bulk quantities of general merchandise, while the latter focuses on home improvement goods. Shares of both companies have been monster winners in the past four decades.

The economic picture might look a bit gloomy. But that isn't stopping you from allocating capital to this sector. Which of these top retail stocks is the better buy right now?

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Costco continues to put up solid financial performance

Costco's financial results make you forget that the U.S. is in the middle of an unprecedented trade war, soft consumer confidence, and record levels of credit card debt. During the fiscal 2025 third quarter (ended May 11), total revenue was up 8% year over year. This was supported by a 5.7% gain in same-store sales, which itself was boosted mainly by higher foot traffic.

This points to the clear value proposition that shoppers see. And it makes complete sense why. Costco provides extremely low prices on high-quality goods in a no-frills environment. It has immense buying power that allows it to obtain favorable pricing on merchandise for its warehouses. This directly benefits shoppers.

The customer base keeps growing, with about 5 million net new cardholders joining in the past 12 months. Costco also benefits from loyalty, as the membership renewal rate was 92.7% in the U.S. and Canada. The business should prove resilient should economic conditions deteriorate, given consumers' ability to handle all of their shopping needs in one stop and in a budget-friendly manner.

This is a massive enterprise. However, the growth story isn't over. Costco plans to end fiscal 2025 having opened 24 net new warehouses. The plan is to expand the physical footprint by about 25 to 30 new stores each year going forward, with plenty of opportunity both in the U.S. and internationally.

Home Depot is in the midst of a slowdown

Home Depot hasn't been navigating the economic situation that well. Higher interest rates pressure the housing market. And inflationary pressures, as well as general uncertainty among consumers, don't bode well for expensive renovation projects. This explains why Home Depot's same-store sales declined 3.2% in fiscal 2023 and 1.8% in fiscal 2024. On a bright note, this key metric is expected to rise 1% this fiscal year, according to management.

With this business, it's best to zoom out and pay attention to the bigger picture. For starters, Home Depot remains an extremely profitable enterprise. Its operating margin has averaged 14.4% in the past five years. Consistent earnings mean investors benefit from regular payouts. Home Depot spent $2.3 billion in dividends just in the past fiscal quarter. Management also occasionally repurchases shares.

The home improvement industry is massive, estimated to be worth $1 trillion in annual revenue. Home Depot is the clear leader, but its 16% market share means there is room to continue growing. It has the brand name, omnichannel capabilities, and product availability to outperform smaller rivals.

It helps that there is so much untapped equity in the housing market, thanks to home prices rising substantially in the past five years in the U.S. Homeowners have the wherewithal to tackle upgrades when they feel confident enough about the economy. And this should drive revenue growth for Home Depot.

How important is valuation to you?

Each of these leading retailers possess their own unique investment merits. However, I don't think it's a polarizing view to say that Costco is the better business. Its financial performance speaks for itself.

This doesn't mean you should go out and immediately buy Costco shares. The valuation will give anyone a reason to pause and think twice. Shares trade at a price-to-earnings (P/E) ratio of 59.7, which is extremely expensive. It's totally reasonable to expect that multiple to come down meaningfully over the next five or 10 years, which introduces a notable headwind for shareholders.

Home Depot stock, on the other hand, trades at a more reasonable P/E ratio of 25.3. To be clear, the business isn't humming along quite like Costco is. But things should improve once the economic backdrop is more favorable. And this means Home Depot has greater upside than Costco.

Should you invest $1,000 in Costco Wholesale right now?

Before you buy stock in Costco Wholesale, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Costco Wholesale wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $669,517!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $868,615!*

Now, it’s worth noting Stock Advisor’s total average return is 792% — a market-crushing outperformance compared to 171% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 2, 2025

Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Home Depot. The Motley Fool has a disclosure policy.

Dividend ETFs come in all shapes and sizes. Some Dividend ETFs focus on a balanced approach, some focus on dividend growth, and some focus on higher yield. One of my favorite Dividend ETFs is the Schwab US Dividend Equity ETF (NYSEMKT: SCHD) because it is well balanced with a high yield and strong dividend growth, meaning you get the best of both worlds. SCHD is also a great complement to tech-heavy portfolios, as it helps offset that exposure.

Watch this short video to learn more, consider subscribing to the channel, and check out the special offer in the link below.

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*Stock prices used were end-of-day prices of May 9, 2025. The video was published on May 10, 2025.

Should you invest $1,000 in Schwab U.S. Dividend Equity ETF right now?

Before you buy stock in Schwab U.S. Dividend Equity ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Schwab U.S. Dividend Equity ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $657,385!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $842,015!*

Now, it’s worth noting Stock Advisor’s total average return is 987% — a market-crushing outperformance compared to 171% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 2, 2025

Mark Roussin, CPA has positions in Schwab U.S. Dividend Equity ETF, Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF, and iShares Trust-iShares Core Dividend Growth ETF. The Motley Fool has positions in and recommends Vanguard Dividend Appreciation ETF and Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool has a disclosure policy.

Mark Roussin is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through their link, they will earn some extra money that supports their channel. Their opinions remain their own and are unaffected by The Motley Fool.

Investing in the stock market isn't all about trying to find the next big growth stock or swinging for the fences, hoping for a massive return. Many investors don't want to turn investing into a job that requires constantly monitoring stocks. They simply want investments that can generate recurring cash flow for years to come.

A good way to accomplish that is by investing in exchange-traded funds (ETFs) which can allow you to do that easily. Not only can you quickly diversify your portfolio through ETFs, but some of them also offer attractive yields.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

The ETFs listed below focus on blue chip dividend stocks and offer high yields. For long-term investors who don't want to worry about the market, these can be safe investments to buy and forget about.

Schwab U.S. Dividend Equity ETF

The Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) pays a yield of 4%, which is fairly high for such a diversified investment. By comparison, the average yield on the S&P 500 is just 1.4%.

Another great feature of this fund is that its expense ratio is fairly low at just 0.06%, which ensures that fees don't chip away at your overall returns.

The stocks selected for the fund pay dividends and have strong financials. Some of the fund's top holdings include Coca-Cola, Verizon Communications, and Home Depot. These are the types of big-name stocks that you can feel comfortable hanging on to for the long haul, and which can generate recurring dividend income for your portfolio along the way.

The majority of the stocks are in energy, consumer staples, and healthcare, with those three sectors accounting for about 56% of the entire portfolio. In total, there are currently 103 holdings in the ETF.

If you just want a good buy-and-forget investment that provides you with plenty of dividend income, the Schwab fund can be an excellent option. Over the past year, its total returns (which include dividends) are modest but stable at around 4%. While that trails the S&P 500 and its 13% performance over the same time frame, in return, you get a fairly diversified investment that doesn't contain as much risk as the overall market.

Vanguard High Dividend Yield Index Fund ETF

A more diversified ETF to consider is the Vanguard High Dividend Yield Index Fund ETF (NYSEMKT: VYM), which has nearly 600 stocks in its portfolio. This is also a low-cost fund whose expense ratio is 0.06%. Its yield is, however, slightly lower at right around 3%, but that is still above average.

There can be a bit less risk and volatility with this ETF simply because there are more holdings, which means that there's less vulnerability to how a single stock performs in the fund. The largest holding in the ETF is Broadcom, which accounts for 4% of the fund's total weight. Other recognizable names include JPMorgan and ExxonMobil.

The Vanguard fund's main three sectors are financials (20%), healthcare (14%), and industrials (13%). In the past 12 months, this ETF's total returns are just under 11%, making it the best-performing fund on this list.

iShares Core High Dividend ETF

Rounding out this list is the iShares Core High Dividend ETF (NYSEMKT: HDV). At just over 8%, its total returns over the past year put it in the middle of the pack. But overall, it's the same story: Investors are sacrificing some returns with these ETFs in exchange for safety. They can help protect you and make your portfolio less susceptible to large declines, but they usually underperform the market when it is doing well.

^SPX data by YCharts.

With the iShares ETF, you'll be collecting a yield of 3.5%. It has a slightly higher expense ratio than the other two ETFs listed here at 0.08%, but the difference is minor and won't have a drastic effect on your overall returns.

The fund is a bit more concentrated with 75 holdings in its portfolio. The focus is on high-quality dividend stocks, with a bit less diversification. ExxonMobil, Johnson & Johnson, and Progressive, which are its three top holdings, make up more than 18% of the ETF's overall weight. Consumer staples, energy, and healthcare are the three largest sectors here, representing close to 60% of the ETF's overall portfolio.

All three of the ETFs listed here can be great options for income investors for the long haul. You get some excellent diversification, incur low fees, and collect fairly high yields.

Should you invest $1,000 in Schwab U.S. Dividend Equity ETF right now?

Before you buy stock in Schwab U.S. Dividend Equity ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Schwab U.S. Dividend Equity ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $635,275!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $826,385!*

Now, it’s worth noting Stock Advisor’s total average return is 967% — a market-crushing outperformance compared to 171% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 12, 2025

JPMorgan Chase is an advertising partner of Motley Fool Money. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot, JPMorgan Chase, Progressive, and Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool recommends Broadcom, Johnson & Johnson, and Verizon Communications. The Motley Fool has a disclosure policy.

Are you looking to build a worry-free, passive long-term portfolio that will allow you to focus on other things while growing your money? Buying and holding a handful of exchange-traded funds (or ETFs) is the answer, of course, and the SPDR S&P 500 ETF Trust (NYSEMKT: SPY) remains a top choice.

If you're truly looking for lifetime holdings though, you may want to consider a slightly different solution that allows you to adjust your overall allocation as time marches on. Namely, you'll want to buy a handful of different (but complementary) ETFs that can be individually scaled back or added to as your risk tolerances change.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

If you have $1,000 in cash available to invest that isn't needed for monthly bills, to pay off short-term debt, or to bolster an emergency fund, here's a combination of ETFs to consider that will likely set most investors up for a lifetime of strong performance.

Vanguard Growth ETF

If this really is going to be a "forever" portfolio, it's a reasonably safe bet that growth is a priority for most of the time frame in question. The Vanguard Growth ETF (NYSEMKT: VUG) will handle this part of the overall job nicely.

Just as the name suggests, the Vanguard Growth ETF holds a basket of growth stocks. The fund currently holds significant stakes in Apple, Microsoft, and Nvidia ... some of the market's top-performing growth names of late. Although this company weighting evolves over time as some companies' market caps outgrow others, this ETF gives you a great shot at major long-term capital gains.

Data by YCharts.

There's a very particular reason, however, you might want to own the Vanguard Growth ETF instead of seemingly similar alternatives like the Invesco QQQ Trust, which holds many of the same stocks. That's the fact that this fund is meant to mirror the CRSP U.S. Large Cap Growth Index. (CRSP stands for the Center for Research in Security Prices.)

That won't mean much to most people. This might get your attention though: The CRSP Large Cap Growth Index largely sidesteps the common problem of taking on too much exposure to the market's very biggest companies, which in turn leaves investors vulnerable to sizable setbacks once the tide finally turns against these top names.

That hardly makes it an "equal weight" index, to be clear -- it's still measurably top-heavy.

The fund is top-heavy to a degree that's tolerable and even a little desirable, however, by virtue of ensuring a little bit of overexposure to companies that are becoming much bigger due to actual top- and bottom-line growth.

Schwab U.S. Dividend Equity ETF

Growth stocks aren't the only way for your portfolio to achieve net growth, of course. It can also be done by a slow and steady (and ever-rising) flow of fresh cash into the account, which is then used to purchase more of whatever's generating that income. For some investors, that will be bonds and other fixed-income instruments. For most people though, this income will come from dividend-paying stocks.

The irony? High-quality dividend-paying stocks often end up outgaining the broad market anyway.

Mutual fund company Hartford crunched the numbers, determining that since 1973, stocks of companies that were able and willing to consistently grow their dividend payments produced average annual net gains of more than 10% (assuming reinvestment of those dividends) while stocks that didn't dish out any dividends didn't perform half as well. Moreover, reliable dividend payers were the market's least volatile stocks during this stretch, making them easier to stick with during turbulent times.

Data by YCharts.

What gives? The best explanation is the argument that quality always eventually shines through, and a reliably growing dividend is a good sign that a company is solid and well-run. Although there's certainly the occasional exception to this norm -- think non-dividend-paying Nvidia -- identifying these exceptions isn't always easy. You should invest based on your best odds, particularly when you're thinking in terms of a lifetime.

The Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) is arguably the best way to plug into this dividend-driven dynamic. Based on the Dow Jones U.S. Dividend 100™ Index, this ETF doesn't simply hold what appear to be the market's most promising dividend stocks. In addition to requiring at least 10 consecutive years of annual dividend increases, inclusion in this index also considers fundamental factors like free cash flow versus debt, return on equity, and its typical dividend growth rate. Each prospective constituent is then ranked on these metrics to screen out all tickers other than the best 100 names.

While this approach seems quite mechanical, that's the reason it works so well. There's no misleading emotion, presumption, or bias built into the selection and rebalancing process.

iShares U.S. Technology ETF

Finally, add the iShares U.S. Technology ETF (NYSEMKT: IYW) to your list of ETFs to buy and hold for a lifetime if you've got $1,000 -- or any other amount of money -- you'd like to put to work for a while.

It's obviously different than either of the other two exchange-traded funds suggested here, both of which represent a unique investing school of thought. A sector-based fund is more strategically precise, calling into question whether or not it's actually capable of being a true lifetime holding. And maybe it isn't. It would be shocking, however, if the technology sector wasn't a great one to plan on holding for the long haul, even if you can't fully see its future.

Data by YCharts.

Think about it. Ever since personal computers began proliferating back in the late 1990s, the world has increasingly become digitized. Automobiles have them on board, and people would struggle to function without the mini mobile computer they now carry around in their pocket or purse. Artificial intelligence is now being used by the pharmaceutical industry to discover, design, and digitally test new drugs. Factories are made more efficient by being able to instantly share and create actionable data. At the heart of all of it is technology, and now that we've seen what it can do, we're certainly not going back to the "old way" that was less efficient and less effective. Now, one of the world's most commonly asked questions is: How can we use technology to make things even better?

There's more than one exchange-traded fund that would fit this bill, but the iShares U.S. Technology ETF is arguably the best all-around prospect thanks to how it weights its holdings.

Built to mirror the performance of the Russell 1000 Technology RIC 22.5/45 Capped Index, this fund -- like the aforementioned Vanguard Growth ETF -- at least attempts to maintain a reasonably balanced allocation even when the market itself is becoming top-heavy thanks to the ongoing growth of a small handful of massive companies. As Russell explains in a factsheet on the index, "At the quarterly index reviews, all companies that have a weight greater than 4.5% in aggregate are no more than 45% of the index, and no individual company in the index has a weight greater than 22.5% of the index."

This approach doesn't always perfectly accomplish its goal. Right now, for instance, Microsoft, Nvidia, and Apple collectively account for about 45% of the index's value. That's not particularly well balanced.

The weighting rules will help more often than not in the long run though, and will certainly help more often than they hurt.

Should you invest $1,000 in Vanguard Index Funds - Vanguard Growth ETF right now?

Before you buy stock in Vanguard Index Funds - Vanguard Growth ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard Index Funds - Vanguard Growth ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $635,275!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $826,385!*

Now, it’s worth noting Stock Advisor’s total average return is 967% — a market-crushing outperformance compared to 171% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 12, 2025

James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, and Vanguard Index Funds - Vanguard Growth ETF. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

The risk has been increasing that the United States will have a recession in 2025 or within the next year, according to top Wall Street firms and economists. Recession risk has risen sharply over the last few months, largely due to the trade war and the potential for tariffs to hurt U.S. (and global) economic growth and ignite inflation.

Below I'll explore the current probability of a near-term recession and what stocks could hold up best during the next recession.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

What's the probability of a near-term recession in the United States?

Many of the probability estimates from experts that the U.S. will have a recession in 2025 or within one year fall within the 40% to 60% range, though there are some credible sources with estimates that are lower and higher. In early April, Wall Street company Goldman Sachs boosted its one-year recession-risk probability to 45% from 35%, which it had previously increased from 20% in late March.

Also in early April, JPMorgan pegged the odds of a U.S. recession in 2025 at 60%, up from its early March forecast of 40%. In mid-April, the investment bank reiterated its 60% probability. It said that President Donald Trump's 90-day pause on his April 2 country-specific so-called reciprocal tariffs "reduces the shock to the global trading order, but the remaining universal 10% tariff is still a material threat to growth, and the 145% tariff on China keeps the probability of a recession at 60%."

Which categories of stocks should hold up best during the next recession?

Certain categories of stocks tend to perform better than others during economic downturns. These mostly include what are called "defensive stocks" that tend to pay dividends.

Defensive stocks include several broad classes, including:

• Stocks of companies that make products or provide services that people need no matter the economic climate.
• Gold and silver mining stocks. Precious metals are considered hedges on inflation and the relative value of the U.S. dollar, which generally weakens during recessions.

Examples of the first group listed above include:

• Consumer staples: Food and beverage makers, personal and home care products manufacturers.
• Utilities: Water, electric, and gas utilities.
• Healthcare: Pharmaceutical makers, medical-device makers.
• Discount retailers: In tough economic times, many consumers tend to be more price-conscious.

There are other types of stocks that tend to weather recessions well. You can think of one group as "small indulgence stocks."

During economic downturns, many people will feel uncertain about their job security. As a result, they'll put off large expenditures, such as homes and new vehicles, and cut back their spending on discretionary items, such as clothing.

However, many folks will keep spending on what they consider relatively inexpensive "treats." Some might even increase their spending on such products or services to reward themselves for putting off spending on big-ticket items.

Examples of "small indulgence" products and services include relatively inexpensive:

• Entertainment, such as video-streaming
• Comfort foods (such as chocolates), meals out (fast-food restaurants)

What stocks gained or held up relatively well during the Great Recession?

All recessions are somewhat different, so it's not possible to say that just because select stocks held up well during prior recessions, they'll hold up well in future ones. That said, in general, certain types of stocks tend to perform better than others during tough economic climates, as discussed above, so investors can learn valuable lessons by looking at past recessions.

The Great Recession was a deep economic downturn that officially lasted for 18 months from Dec. 2007 through the end of May 2009. It's widely considered the most severe U.S. economic downturn since the Great Depression, which began following the stock market crash in 1929 and didn't end until the start of World War II in 1940.

During the one-and-a-half years of the Great Recession, the S&P 500 index, including dividends, plunged 35.6%.

Table 1: Stocks that gained during the Great Recession

These stocks and one exchange-traded fund (ETF) are listed in order of descending performance during the Great Recession. This list isn't all-inclusive.

Company	Market Cap	Dividend Yield	Wall Street's Projected 5-Year Annualized EPS Growth	Return During Great Recession	Return From Start of Great Recession to Present*
Netflix (NASDAQ: NFLX)	$469 billion	--	23.6%	70.7%	33,280%
iShares Gold Trust ETF	$41.9 billion net assets	--	--	24.3%	302%
J&J Snack Foods	$2.5 billion	2.4%	9.1%	18.1%	404%
Walmart	$762 billion	1%	9.5%	7.3%	761%
McDonald's	$226 billion	2.2%	7.6%	4.7%	778%
S&P 500 index	--	1.36%	--	(35.6%)	424%

Data sources: Yahoo! Finance, finviz.com and YCharts. Data to Friday, April 25, 2025. EPS = earnings per share. *Bold-faced returns = stock has beaten the S&P 500.

• Netflix: Video-streaming pioneer that's the world's leading video-streaming company.
• iShares Gold Trust ETF: Exchange-traded fund that aims to track the price of gold.
• J&J Snack Foods: Produces niche snack foods and frozen beverages.
• Walmart: World's largest retailer by revenue, focuses on low prices.
• McDonald's: World's largest fast-food restaurant chain by revenue.

Table 2: Stocks that held up relatively well during the Great Recession

The following stocks declined during the Great Recession but held up much better than the broader market, which dropped nearly 36%. This list isn't all-inclusive.

Company	Market Cap	Dividend Yield	Wall Street's Projected 5-Year Annualized EPS Growth	Return During Great Recession	Return From Start of Great Recession to Present*
Newmont	$60.8 billion	1.8%	7.2%	(0.3%)	54.5%
Hershey (NYSE: HSY)	$33.1 billion	3.4%	(7.4%)	(7.2%)	524%
Church & Dwight (NYSE: CHD)	$24.4 billion	1.2%	7.4%	(9.6%)	792%
American Water Works (NYSE: AWK)	$28.1 billion	2.1%	6.5%	(12.7%)*	953%
NextEra Energy (NYSE: NEE)	$136 billion	3.4%	8.2%	(15.7%)	531%
S&P 500 index	--	1.36%	--	(35.6%)	424%

Data sources: Yahoo! Finance, finviz.com, and YCharts. Data to Friday, April 25, 2025. EPS = earnings per share. *Bold-faced returns = stock has beaten the S&P 500. **Company went public in April 2008, a few months after the recession started.

• Newmont: World's largest gold mining company, which also mines other metals.
• Hershey: Largest chocolate company in the U.S. by market share, also sells salty snack foods.
• Church & Dwight: Home and personal-care product maker, best known for its iconic Arm and Hammer brand baking soda.
• American Water Works: The largest and most geographically diverse regulated U.S. water and wastewater utility.
• NextEra Energy: Largest electric utility in the U.S. by market cap and the world's largest generator of renewable energy from wind and sun.

Key takeaways from the above 2 tables

1. Gold mining stocks (Newmont, Table 2) and gold ETFs (iShares Gold Trust ETF, Table 1) might hold up well or even make strong gains during tough economic climates, but they rarely perform well during booming economic times. Therefore, they tend to underperform the market over the long term. These investments are highly volatile and cyclical and best left to short-term traders.

2. Netflix and Hershey are good examples of "small indulgence stocks," as described above. Moreover, Netflix has an added benefit that wasn't an issue during the Great Recession: It should be little affected by the raging tariff war, as U.S tariffs on imports and other countries' retaliatory tariffs are on goods, not services. This is an important distinction that investors should keep in mind when selecting stocks.

3. Top utility stocks can outperform the market over the long term, despite conventional wisdom to the contrary. (Cases in point: American Water Works and NextEra Energy, Table 2.) These stocks aren't just "widow and orphan stocks," as stockbrokers, in general, have long characterized them. A statistic that might surprise many investors: As of April 25, shares of Google parent Alphabet have performed only slightly better than shares of American Water since the latter's initial public offering (IPO) 17 years ago in April 2008: GOOGL has returned 1,090% to AWK's 953%.

4. There are some top-performing stocks that get very little coverage in the financial press. (Case in point: Church & Dwight, Table 2). One takeaway here is that investors shouldn't conflate the amount of coverage a stock gets in the financial press with its desirability as an investment, especially a long-term investment.

Review your stock holdings -- but stay in the market

As noted in this article's opening, top Wall Street banks and economists generally give odds ranging from 40% to 60% that the U.S. will have a recession in 2025 or within the next year. These are quite high odds, so it makes sense that investors review their stock portfolio and perhaps tweak it to make it more recession-resistant.

That said, if you're a long-term investor, it's not a good idea to get out of the stock market entirely or make huge changes, such as selling all of your growth stocks. It's extremely difficult to time the market. If you sell your growth stocks that don't tend to do well during recessions (such as tech stocks), you'll risk missing the early stages of their upturns during the next bull market -- and the early stages of a sustained upturn tend to be strong.

Time is a long-term investor's friend. Over the long term, the direction of the U.S. stock market has been decisively up. The longer your investing time frame, the less concerned you need to be about recessions causing market downturns.

Should you invest $1,000 in Netflix right now?

Before you buy stock in Netflix, consider this:

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. JPMorgan Chase is an advertising partner of Motley Fool Money. Beth McKenna has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Goldman Sachs Group, Hershey, JPMorgan Chase, Netflix, NextEra Energy, and Walmart. The Motley Fool has a disclosure policy.

Investing in the stock market can seem like a daunting task. There are so many options available. Making matters worse, there's so much uncertainty in the air these days with tariffs and their potential impact on the economy and stock market.

If you're feeling nervous about stocks and picking individual ones, one solution is to invest in a top exchange-traded fund (ETF). These investment vehicles can provide broad exposure to the market's long-term upside with less risk. A simple one to start with is the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD). It holds a portfolio of high-quality dividend stocks that can provide investors with a tangible return during uncertain times in the form of dividend income. For example, investing $1,000 into this fund would at its current payout produce about $40 of dividend income each year. That's only part of the draw, which is why it's such a great fund to buy right now.

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Turning cash into cash flow

The Schwab U.S. Dividend Equity ETF has a very simple strategy. It tracks an index (Dow Jones U.S. Dividend 100 Index) that screens companies based on the quality of their dividends and financial profiles. The result is a list of 100 companies with higher dividend yields, strong dividend growth rates, and healthy financial profiles.

For example, the fund's top holding is Coca-Cola (NYSE: KO). The beverage giant currently has a dividend yield of nearly 3%, which is about double the yield of the broader market (the S&P 500's dividend yield is less than 1.5%). Coca-Cola increased its dividend payment by 5.2% earlier this year. That marked the 63rd consecutive year it increased its dividend. It's part of the elite group of Dividend Kings, companies with 50 or more years of annual dividend growth. The company backs its dividend with strong free cash flow and a top-notch balance sheet.

At the fund's annual rebalancing last month, its holdings had an average dividend yield of 3.8%. That yield has crept up as the stock market (and the ETF's value) has declined in recent weeks and is now up over 4%. At that rate, a $1,000 investment in the fund would produce more than $40 of annual passive income.

Meanwhile, the current group of holdings has delivered an average dividend growth rate of 8.4% over the past five years. Because of that, the ETF should steadily pay out more cash as its holdings continue increasing their payouts:

SCHD Dividend data by YCharts

Dividend income is only part of the draw

The likely growing stream of dividend income supplied by the Schwab U.S. Dividend Equity ETF provides investors with a solid base cash return. While the payment will ebb and flow each quarter based on when the underlying companies make their dividend payments, it should continue to steadily head higher as they grow their dividends. Given the strength of their financial profiles, these companies should continue increasing their payouts even if there's a recession.

That rising income stream is only part of the return. The share prices of the companies held by the fund should increase in the future as they grow their earnings in support of their rising dividends.

Over the long term, dividend growth stocks have historically produced excellent total returns. According to data from Hartford Funds and Ned Davis Research, dividend growers and initiators have delivered an average annual return of 10.2% over the past 50 years. That has outperformed companies with no change in their dividend policy (6.8%), non-dividend payers (4.3%), and dividend cutters and eliminators (-0.9%).

The Schwab U.S. Dividend Equity ETF has delivered similarly strong returns throughout its history. It has produced an 11.4% annualized return over the past decade and 12.9% since its inception in 2011. While there's no guarantee it will earn returns at those levels in the future, its focus on the top dividend growth stocks puts it in an excellent position to continue delivering strong returns for investors.

A great fund to buy right now

With the stock market slumping this year, shares of the Schwab U.S. Dividend Equity ETF are down about 15% from the high point earlier in the year. That's a great entry point for this high-quality fund. It positions investors to generate lots of dividend income while potentially capturing strong total returns over the long term.

Should you invest $1,000 in Schwab U.S. Dividend Equity ETF right now?

Before you buy stock in Schwab U.S. Dividend Equity ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Schwab U.S. Dividend Equity ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $591,533!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $652,319!*

Now, it’s worth noting Stock Advisor’s total average return is 859% — a market-crushing outperformance compared to 158% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 21, 2025

Matt DiLallo has positions in Coca-Cola and Schwab U.S. Dividend Equity ETF. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Costco (NASDAQ: COST) and Home Depot (NYSE: HD) are two of the biggest retailers in the world. One focuses on general merchandise, while the other caters to DIY and professional customers with home improvement products. The combined market cap of these two companies is a staggering $770 billion as of April 21.

Costco and Home Depot have been wildly successful investments in the past three decades. But between these dominant businesses, which one is the top retail stock to add to your portfolio right now?

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Not worried about a recession

Investors are becoming more worried that an economic downturn is on the horizon. This probably isn't too much of a concern for Costco and its management team. The business continues to thrive regardless of external forces.

During the fiscal 2025 second quarter (ended Feb. 16), same-store sales (SSS) were up 6.8% year over year. This was driven mostly by a meaningful gain in foot traffic, an encouraging sign. Home furnishings, gold and jewelry, and appliances, among other items, registered strong growth.

In a potential recessionary period, Costco should be able to hold up better than its rivals. Its focus on low prices on quality goods makes it a favorite choice among consumers, especially when it comes to everyday essentials.

A successful membership-based model keeps these shoppers loyal, while also providing the business with a high-margin and recurring revenue stream. Costco's membership base now sits at 78.4 million households, supporting $1.2 billion in membership fee income.

Costco's ability to generate consistent profits is a feature of the durable demand it experiences. In addition to a regular dividend, the leadership team shares these earnings with investors in the form of special one-time payouts. The last one was for $15 per share in January 2024. A favorable capital allocation practice like this can boost returns for investors.

Thinking about the bigger picture

Home Depot raked in $159.5 billion in revenue in fiscal 2024 (ended Feb. 2), putting it significantly ahead of Lowe's in the home improvement industry. Its massive scale allows for sizable investments in supply chain and omnichannel capabilities, ensuring adequate inventory for customers. Home Depot's brand name undoubtedly carries weight, too.

Despite its competitive strengths, the business has been struggling recently. On the fourth-quarter 2024 earnings call, CEO Ted Decker said he and his team are focused on strategic priorities "despite uncertain macroeconomic conditions in a higher interest rate environment that impacted home improvement demand."

It's not surprising that the backdrop doesn't give people the confidence they need to spend a lot on a costly renovation project. Home Depot's SSS are expected to rise by only 1% this fiscal year, after falling 1.8% in fiscal 2024.

However, the overall industry should favor Home Depot in the long run. The median age of a home in the U.S. has gone up over the years. And the leadership team points to trillions of dollars in untapped home equity that can go toward upgrades.

Investors will be pleased with Home Depot's capital returns. The company paid $8.9 billion in dividends last fiscal year, and in the past five years, it has reduced the outstanding share count by almost 10%.

The final word on Costco vs. Home Depot

In my mind, Costco is the superior business compared to Home Depot, due to the simple fact that its customer demand appears to be much less sensitive to macro forces, while the latter's dependency on a favorable housing market is evident. To be clear, though, both are likely set to be affected by tariffs as things stand today.

However, that doesn't mean Costco is the better retail stock to buy. Home Depot is more deserving of a spot in your portfolio. It comes down to valuation. The home improvement chain's shares trade at a price-to-earnings ratio of 23.2, well below Costco's 55.9 multiple.

Some investors might not be fazed, preferring to own the best businesses regardless of valuations. This will push you toward choosing Costco over Home Depot. In this instance, I think the smart move is to adopt a dollar-cost averaging strategy, allocating a small sum on a recurring basis to buy shares at various price points.

Should you invest $1,000 in Costco Wholesale right now?

Before you buy stock in Costco Wholesale, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Costco Wholesale wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $566,035!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $629,519!*

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Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Home Depot. The Motley Fool recommends Lowe's Companies. The Motley Fool has a disclosure policy.

For years, the Schwab US Dividend Equity ETF (NYSEMKT: SCHD) has been one of the best dividend-focused exchange-traded funds (ETFs) for investors to buy. The ETF has shown its ability to compound wealth through share price appreciation, high dividend yield, and strong dividend growth.

At the end of March, Schwab US Dividend Equity ETF went through its annual reconstitution, and now we have a slew of new stocks that have been added to the portfolio and stocks that have been removed. In today's video, I will discuss the changes as well as the new sector breakdown.

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Watch this short video to learn more, consider subscribing to the channel, and check out the special offer in the link below.

*Stock prices used were end-of-day prices of March 23, 2025. The video was published on March 24, 2025.

Should you invest $1,000 in Schwab U.S. Dividend Equity ETF right now?

Before you buy stock in Schwab U.S. Dividend Equity ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Schwab U.S. Dividend Equity ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $509,884!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $700,739!*

Now, it’s worth noting Stock Advisor’s total average return is 820% — a market-crushing outperformance compared to 158% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 10, 2025

Mark Roussin, CPA has positions in Schwab U.S. Dividend Equity ETF. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Mark Roussin is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through their link, they will earn some extra money that supports their channel. Their opinions remain their own and are unaffected by The Motley Fool.