Schwab US Dividend Equity ETF SCHD stands out for its sensible, transparent, and risk-conscious approach that should continue to generate better long-term risk-adjusted returns than the Russell 1000 Value Index. 

The Dow Jones US Dividend 100 Index underpinning this fund admits 100 stocks that have paid dividends for at least 10 consecutive years and boast the financial health to extend that streak. Industry fixtures like Coca-Cola KO and Home Depot HD meet those requirements and sit atop the portfolio. Dividend-oriented firms with healthy balance sheets tend to be more insulated from market movements than highfliers or low-quality competitors, so this fund normally strikes a defensive stance.

Strict stock-selection criteria give this fund potent exposure to the quality factor, which has historically been tied to market-beating returns. The fund comfortably and consistently beats the Russell 1000 Value Index in profitability metrics like return on invested capital. Entering March 2024, nearly 65% of the portfolio represented stocks with wide Morningstar Economic Moat Ratings, a higher share than 96% of Morningstar Category peers. Quality doesn’t come cheap, but focusing on the higher-yielding half of the market and tilting toward mature franchises lands the fund in the large-value category.

Stocks that make the cut are weighted by market cap, an efficient approach that channels the market’s collective view on each stock’s relative value. It also muffles the impact of riskier, higher-yielding holdings because stock weightings rise and fall alongside valuations. The fund limits each stock’s weighting to 4% of the portfolio and each sector to 25%. Concentration can bubble up in lean portfolios like this one, so these measures help the fund stay diversified.

Index buffers effectively mitigate turnover and the associated transaction costs. The index may retain current constituents over more deserving candidates, but the lower trading costs make this a worthy trade-off. A rock-bottom fee makes the fund a very cheap all-around offering.

Analyst Rating

The gold standard for dividend funds.

Analyst

Ryan Jackson

Texas Instruments

Amgen

PepsiCo

Lockheed Martin

Chevron

Pfizer

Coca-Cola

BlackRock

Cisco Systems

This simple, transparent strategy effectively identifies high-quality stocks at reasonable prices. That valuable balance has helped the fund capably navigate drawdowns and keep pace during rallies, meriting a High Process Pillar rating. 

The Dow Jones US Dividend 100 Index selects constituents from the Dow Jones US Broad Market Index, which covers the broad US stock market but excludes REITs. To be eligible for the index, stocks must exceed a $500 million market cap, meet liquidity requirements, and—most importantly—have paid cash dividends for at least 10 straight years. The index ranks stocks that check those boxes by indicated annual dividend yield and screens out those that rank in the bottom half.

Remaining stocks receive a composite score that equally weights four metrics: free cash flow/total debt, return on equity, yield, and five-year dividend growth rate. The index ranks stocks by their composite scores and retains current constituents that land in the top 200. The index then adds the highest-scoring newcomers until 100 firms fill the portfolio. Prioritizing existing holdings outside the top 100 can omit more-qualified stocks, but the reduced turnover and transaction costs make it a worthy sacrifice. The index reconstitutes annually.

Stocks that make the cut are weighted by market cap, which leverages the market’s consensus expertise to size its positions. The index caps each stock’s weighting at 4% of the portfolio and each sector's weighting at 25% to rein in concentration. Stock and sector weightings can spill over these limits between each quarterly rebalance, but the index can rebalance on an ad hoc basis to stymie concentration.

High

Process

Consistently tight index tracking and the incremental advantages it offers at the margins underpin an Above Average People Pillar rating for Schwab's equity index team. 

Its management approach ensures continuity, with multiple managers in place to mitigate the impact of any single manager's departure. This setup, combined with a largely automated workflow, allow the managers to focus on oversight and step in with a hands-on approach when necessary. The team uses industry-standard tools that it supplements with proprietary in-house applications to maintain a robust investment process. The integration of BlackRock's Aladdin platform further enhances each manager's ability to monitor and manage their workflow. 

Schwab's team has enhanced its operational capabilities, particularly in the creation and redemption processes that are critical for its ETFs’ liquidity and tracking efficiency. Associate managers play a key role in preparing for index rebalances and managing day-to-day tasks, including corporate actions. This proactive involvement allows the team to seek incremental return improvements by handling certain corporate actions differently than the index, albeit within strict tracking-error constraints. Aligning manager compensation with the fund's tracking error and adherence to risk management protocols ensure that the managers’ interests are closely tied to investors'.

Above Average

People

Under new but familiar leadership, Schwab Asset Management Solutions maintains its Above Average Parent Pillar rating. 

After the former Schwab CEO was named president of parent Charles Schwab Corporation in 2022, Omar Aguilar, a Schwab CIO since 2011, was promoted to CEO while retaining his CIO role. Under Aguilar's leadership, Schwab remains focused on core-oriented strategies: More than 95% of the firm's fund assets under management are in low-cost index products that are suitable for the biggest portions of investors' portfolios. Index-tracking remains are par with the best teams in the business.

Recent strategic initiatives show a desire to grow in an increasingly competitive landscape. Forays into direct indexing—which customizes separate accounts through tax-loss harvesting, values-based requests, or other client preferences—as well as some new launches, such as Schwab Municipal Bond ETF, fit the firm's strategic focus and are natural extensions of its capabilities. However, other recent launches in more-niche asset classes, including Schwab Crypto Thematic ETF, contrast previous refusals to enter trendy markets. 

Schwab benefits from its association with its parent's brokerage business. This arrangement and efficient operation allow funds to grow quickly and keep fees in line with larger competitors. Historically, Schwab has been quick to match competitor fee cuts and now sports a 0.09% asset-weighted average fee across its mutual funds and ETFs.

Parent

Schwab US Dividend Equity ETF

SCHD tracks a market-cap-weighted index of 100 dividend-paying US equities.

SCHD is a safe hold for the coming macro events of rate hikes and subsequent recession. The fund will do well under rate hikes due to its large cap value holdings and large position in financial holdings that stand to gain from such.

SCHD: A Solid Hold For The Coming Storm

SCHD has been the best ETF for income investors over the past decade providing both competitive dividend yields and strong price appreciation. The question is, can that excellent performance continue?

Is SCHD Still A Good Choice For Dividend Investors?

SCHD's index both rebalances and reconstitutes its holdings the second Friday in March. SCHD has been adjusting to the recent reconstitution.

SCHD's Yearly Reconstitution Adds 14 New Stocks And Eliminates 13

A discussion the holdings of the fund and how this fund is weighted.

The Schwab U.S. Dividend Equity ETF: This Fund Is Not Built For An Inflationary Environment

Many readers asked about the key differences between our portfolio strategy and “traditional” strategies like the 40-60 strategy.

SCHD, Yield Spread Dashboard, And Why We Do Not Do 40-60

Vanguard Total International Bond ETF

SPDR Gold MiniShares Trust

iShares Core S&P 500 ETF

Schwab US TIPS ETF

iShares Short Treasury Bond ETF

ProShares UltraPro QQQ

Vanguard Intermediate-Term Corporate Bond ETF

Vanguard Short-Term Corporate Bond ETF

Vanguard S&P 500 ETF

Vanguard Short-Term Inflation-Protected Securities ETF

Vanguard Value ETF

February was pretty volatile for Wall Street. Though the start of the month was rocky due to rising rate worries and the Russia-Ukraine conflict, investors digested those threats somewhat at the end of the month.

ETF Asset Report of February

Two Lipper classifications that are currently seeing record inflows in this environment are Lipper Equity Income (EIEI) funds and Lipper Loan Participation (LP) funds. The other Lipper classification to report a record-setting week was Lipper Equity Income funds.

Lipper Equity Income And Loan Participation Funds Log Record Weekly Inflows

Invesco International Dividend Achievers ETF

SPDR S&P Dividend ETF

As an alternative to the bond markets, income-minded investors are turning to dividend-paying stocks and related exchange traded funds for a stable source of yields in response to an uncertain interest rate outlook. “Virtually no bond funds look attractive right now.

Income Investors Can Turn to Quality Dividend ETFs

SCHD invests in high quality dividend equities. SCHD is a best-in-class ETF that has outperformed its peers while charging an expense ratio of just 0.06%.

SCHD: Can This ETF Hold Up In 2022?

The economy at large is still growing but more hawkish rate policy could slow growth.

SCHD: A SPY Substitute For ETF Investors

WisdomTree US Quality Dividend Growth Fund

ProShares S&P 500 Dividend Aristocrats ETF

Invesco Dividend Achievers ETF

Vanguard Dividend Appreciation ETF

As U.S. stock markets stumble, investors could be turning to steady-paying, quality dividend exchange traded fund strategies. Dividend-paying stocks have taken the lead as market volatility drags on major U.S. benchmarks, especially in the face of the sell-off in the growth style.

Investors Could Find Comfort in Dividend ETFs in Times of Turmoil

SCHD has had an average return rate of 19% over the past ten years. SCHD has a low expense ratio of 0.06%.

SCHD May Be The Answer For An Investor Looking For A Dividend Play

As inflation concerns mount, investors are can pick up quality dividend growth-related exchange traded funds. Dividend ETFs have enjoyed significant inflows since inflation concerns gained traction in 2021, with many strategies experiencing returns of more than 20% last year, CNBC reports.

Dividend Growth ETFs in Times of Inflation

This is an update of our bull thesis on Schwab U.S. Dividend Equity ETF published on July 16, 2021.

SCHD: Will The Rotation To Value Continue? We Think So

If you're shopping for a dividend-stock fund, do what you do when you buy cereal: Look at what's inside the box (or the portfolio, in this case) so that you know exactly what you're getting. You can't assume that just because a fund has dividend in its name (as hundreds do) that it will closely resemble and perform similarly to other dividend funds, or that it will be a good fit for your investment goals.

The Right Dividend Stock Fund for You

ProShares VIX Short-Term Futures ETF

SCHD and VIXY saw massive volumes on Friday trading session.

Dividend and Volatility: 2 ETFs to Watch for Outsized Volume

iShares Core Dividend Growth ETF

We highlight 3 ultra-cheap ETFs that focus on high quality dividend payers

Why You Should Invest in Dividend Growth ETFs Now

SCHD outperforms its peers on a yield, return, and risk basis.

SCHD: The Dividend ETF For The Best Of Both Worlds

AbbVie

ARK Innovation ETF

Brunswick

Celanese

Crane Holdings Co

CVS Health

Evercore

Fortune Brands Home & Security

Huntington Bancshares

Kroger

Lowe's

Altria

Realty Income Corp

First Trust SMID Cap Rising Dividend Achievers ETF

Sherwin-Williams

Snap-on

AT&T

Universal Forest Products

Vanguard High Dividend Yield ETF

Whirlpool

Worthington Industries

Williams-Sonoma

We start out with a short list of guidelines that make it easier to identify dividend stocks that are still worth investing in right now.

The Best Dividend Stocks For January 2022

SCHD: Dividend Equity ETF, For Long-Term Dividend Growth Investors

JPMorgan Equity Premium Income ETF

Global X S&P 500 Covered Call ETF

ETF.com's Jessica Ferringer faces off with Astoria's John Davi to decide the best dividend income ETF.

ETF Battles: JEPI Vs SCHD Vs XYLD

iShares Core U.S. Aggregate Bond ETF

iShares 7-10 Year Treasury Bond ETF

iShares 3-7 Year Treasury Bond ETF

iShares Core MSCI Emerging Markets ETF

Invesco QQQ

Invesco S&P 500 Equal Weight ETF

SPDR S&P 500 ETF Trust

iShares 20+ Year Treasury Bond ETF

During Refinitiv Lipper's fund-flows week ended December 15, 2021, investors were overall net redeemers of fund assets (including both conventional funds and ETFs) for the first week in nine, withdrawing $50.6 billion. Exchange-traded equity funds recorded $15.9 billion in weekly net inflows for the second time in two weeks.

U.S. Weekly FundFlows Insight Report: Fund Market Suffers Outflows For The First Time In 2 Months Despite Large Cap ETFs Attracting $18.8 Billion

Apple

Abbott Labs

Amplify CWP Dividend & Option Income ETF

Domino's Pizza

Cohen & Steers Closed-End Opportunity Fund

Home Depot

JPMorgan Chase & Co

Mastercard

Medtronic

Global X MLP ETF

Microsoft

NIKE

Pacer Metaurus US Large Cap Target Dividend 400 ETF

Invesco NASDAQ Next Gen 100 ETF

Invesco Nasdaq 100 ETF

iShares Mortgage Real Estate ETF

Starbucks

Schwab Strategic Trust-Schwab International Dividend Equity ETF

Global X MSCI SuperDividend Emerging Markets ETF

Global X Superdividend ETF

The portfolio generated $1,067 in dividends during the month, an improvement over August. YTD, I've received $12,700. I closed out my positions in REM, DIS, MLPA, and SPYD.

My Dividend Growth Portfolio November Update: 27 Holdings, 7 Buys, 4 Sells

VYM & SCHD are two great ETFs offering low cost, diversity, and strong dividend performance.

VYM Vs. SCHD: Comparing High Yield To Dividend Growth

First Trust Rising Dividend Achievers ETF

SPDR Portfolio S&P 500 High Dividend ETF

Vanguard International High Dividend Yield ETF

In 2020, ETFs saw a record $504 billion in flows. According to CFRA Research's Todd Rosenbluth, 2021 is set to blow that record out of the water.

Dividend ETFs Have Brought in Nearly $40 Billion This Year

News for Schwab US Dividend Equity ETF ETF (SCHD)