SCHD offers a compelling blend of 3% yield, long-term dividend growth, and broad diversification for income-focused investors. Despite recent underperformance, SCHD's 10% annualized dividend growth and defensive sector allocation support its long-term value proposition. Robust fund inflows and a strong track record of NAV and dividend growth reinforce SCHD's appeal as a core holding for passive income portfolios.
If you're looking for a high yield ETF that can still grow at a respectable rate, you'll probably want to look no further than the Schwab US Dividend Equity ETF (NYSEARCA:SCHD).
SCHD has underperformed the S&P 500 and failed to act defensively during recent market corrections, prompting me to sell my position. Top holdings face significant headwinds: weak oil prices, drug price controls, tariffs, and a declining U.S. dollar impacting multinational profits. Persistently high interest rates and a lack of Fed dovishness further dampen the outlook for dividend stocks in Schwab U.S. Dividend Equity ETF's portfolio.
Dividend investing is under criticism, as growth stocks outperform, but market cycles suggest caution is warranted at this stage of the bull market. SCHD's quality-focused approach sets it apart from other high-yield ETFs, as it focuses on financial strength and strong fundamentals. Historical double-digit dividend growth unlikely to continue, given the exposure to cyclicals and healthcare.
SCHD is my favorite dividend growth ETF. I break down its strengths and weaknesses. I also share which stocks and funds I would buy alongside SCHD to build a powerful dividend machine.
Financial markets are a complex flow chart for those who understand how to read demand and supply within the broader context, where everything ties back to the concept of a benchmark. This can affect many spaces equally, but also differently at the same time.
My 4-Factor Dividend Growth Portfolio offers a custom, growth-oriented alternative to SCHD, using a fully automated, rules-based stock selection and annual rebalancing. Since its inception in November 2022, the portfolio has delivered a 15.99% CAGR, outpacing SCHD but trailing the S&P 500; the long-term target is 12%+ CAGR. Dividend growth remains strong, with an annualized 9.55% dividend CAGR and a narrowing income gap versus SCHD, despite a lower current yield.
Schwab U.S. Dividend Equity ETF™ underperforms short term, but remains a top long-term income vehicle amid rising rate cut expectations. Fed pressure parallels 1970s history; Powell may be replaced by a more dovish, rate-cutting Chair in 2026. Dividend ETFs like SCHD offer better tax-adjusted yields than cash equivalents in taxable brokerage accounts.
Key Points in This Article: Dividend growth investing ensures steady income and growth, driving my regular share purchases of the Schwab U.S.
Downgrading SCHD to Hold as recent market volatility exposed its weaker-than-expected defensive qualities, especially during the "Liberation Day" panic. Energy sector exposure and falling oil prices have hurt SCHD's performance, while AI-driven growth stocks have outperformed in the current environment. Technical indicators signal ongoing weakness, with SCHD trading below key moving averages and lacking positive momentum.
SCHD's recent under-performance is overblown; its long-term track record and 3.9% yield make it a strong wealth-building vehicle. The ETF's March 2025 energy sector overweighting positions it to benefit from rising petroleum prices amid Middle East tensions. Additionally, SCHD's pro-cyclical equity posture positions the ETF for further NAV growth.
The recent correction in the Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD) has many passive income investors wondering if it's time to load up or jump out.