The Schwab US Dividend Equity ETF (SCHD) is hovering near its all-time high as the earnings season takes shape. SCHD was trading at $27.95 on Thursday, a few points below its all-time high of $29.45.
The Schwab U.S. Dividend Equity ETF (SCHD) was launched on 10/20/2011, and is a passively managed exchange traded fund designed to offer broad exposure to the Large Cap Value segment of the US equity market.
There is a huge temptation for income-focused investors to buy the highest-yielding stocks in an effort to boost the cash they generate from their portfolios. Anyone who has done this likely knows that buying based on yield alone can end up with you buying poorly run companies and result in diminished returns through often painful dividend cuts.
SCHD is a strong buy due to its high dividend yield and growth, especially amid market panic over Chinese AI threats and tech stock volatility. SCHD outperforms rivals VIG and VYM in liquidity, dividend yield, and growth, making it a superior choice in the current uncertain market. Despite higher concentration risks, SCHD's technical setup shows bullish momentum, indicating positive short-term sentiment and potential for continued upward movement.
Dividend stocks make great long-term investments. For example, an investor who bought $100 worth of average dividend stocks in 1973 would have seen that investment grow to over $8,700 as of the end of 2023, according to a study from Hartford Funds and Ned Davis Research.
I discuss my use of the Schwab U.S. Dividend Equity ETF™ for planning early retirement, weighing the merits of total returns versus dividend yields. Historical data shows dividend stocks like those in the SCHD ETF typically underperform the broader market, but I argue the trade-off is worth it for income reliability. My goal is to increase my dividend stock exposure to 50% of my portfolio to cover half my living expenses, accepting lower total returns for income stability.
The Schwab U.S. Dividend Equity ETF offers automatic diversification, income, and growth with a 3.5% dividend yield and low 0.06% expense ratio. SCHD's diversified portfolio of 103 holdings includes top dividend growth names like Pfizer, Coca-Cola, and AbbVie, well-positioned for long-term returns. With a strong dividend growth history and defensive sector focus, SCHD is ideal for dollar-cost averaging, especially in uncertain market environments.
Even though the Schwab U.S. Dividend Equity ETF offers investors an attractive blend of dividend income and dividend growth, a reduced level of diversification can be noted. Today's article aims to reduce the ETF's weaknesses by enhancing it with January 2025's top 10 high dividend yield companies and 5 individually selected dividend growth companies. I will show you how to allocate the amount of $100,000 across SCHD and these 15 individually selected companies to increase your portfolio's level of diversification.
The Schwab US Dividend Equity (SCHD) ETF has done well in the past decade as it became one of the biggest dividend and sleep-well-at-night (SWAN) funds. It has soared by over 400% since its inception in 2012 and generated more total returns than other funds.
The S&P 500 is overvalued and concentrated. SCHD offers a favorable alternative with a 3.55% dividend yield, focusing on value stocks and dividend growers, which are better suited for the current high-yield environment. Value stocks in SCHD are historically cheap relative to growth stocks, making them attractive, especially given the current interest rate landscape.
I strongly advise against investing in the Schwab U.S. Dividend Equity ETF due to its consistent underperformance compared to broader market indices. Despite its focus on high dividend-yielding, financially sturdy stocks, SCHD's returns have lagged behind the S&P 500, NASDAQ, and Dow Jones Industrial Average. Alternative portfolios, including individual high-yield stocks like AT&T and Truist Financial, offer better returns and higher yields than SCHD.
The higher-for-longer rate scenario has pressured the valuation of dividend stocks due to their bond-proxy flavor. However, the pressure is not felt evenly between SCHD and VYM. SCHD's yield spread over VYM is at a decade high, signaling an undervaluation and prompting an upgrade to Buy for SCHD.