The S&P 500 has made a positive start to the year, showing an increase of 7% as of Tuesday. A significant portion of these gains has been realized since March 30, with the index jumping over 15% during that period. This resurgence has been particularly welcome, as it has shifted the focus from potential corrections to levels that are once again flirting with all-time highs.
While the S&P 500 often garners the spotlight for its performance, one particular dividend exchange-traded fund (ETF) is turning heads with even more substantial returns this year: the Schwab U.S. Dividend Equity ETF (SCHD). As of Tuesday, SCHD has recorded an increase of more than 15%, suggesting that its allure is only amplifying.
Investors seeking to diversify their portfolios with dividend ETFs may find SCHD to be one of the top contenders available. The ETF is known for its rigorous selection criteria, setting it apart from other dividend funds. Unlike many similar funds that prioritize high dividend yield, SCHD places greater emphasis on the stability of the dividend and the financial health of the companies it includes.
To qualify for inclusion in the Dow Jones U.S. Dividend 100 Index, which SCHD tracks, companies must have demonstrated at least ten consecutive years of dividend increases, maintain favorable debt ratios, and exhibit reliable cash flow. In an environment where many investors are wary of the pricey tech sector—dominated by the S&P 500—potential bubbles in artificial intelligence, and geopolitical uncertainties such as the war in Iran, a trend toward value investing in dividend stocks is emerging.
SCHD’s composition reflects this trend. While its top two holdings are in technology (Texas Instruments and Qualcomm), its portfolio is diversified across more stable sectors such as healthcare (Merck), consumer staples (Coca-Cola, PepsiCo), and energy (ConocoPhillips). This sector allocation renders SCHD appealing during turbulent times in the economy. The ETF is divided by sector as follows:
– Consumer staples: 19.39%
– Healthcare: 18.82%
– Energy: 16.87%
– Industrials: 11.46%
– Information technology: 11.07%
– Financials: 9.01%
– Communication services: 6.92%
– Consumer discretionary: 6.42%
– Utilities: 0.04%
This unique sector allocation has contributed to SCHD’s impressive performance thus far this year, setting it apart from major indexes.
However, it’s important to keep expectations in check. Historically, SCHD has not consistently outperformed the S&P 500. Over the past ten years, it has only surpassed the index’s returns three times. For instance:
– In 2025, S&P 500 returns were 17.9%, while SCHD returned 14%.
– In 2024, the S&P gained 25% compared to SCHD’s 16.2%.
– In 2023, the S&P rose by 26.3%, with SCHD lagging at 4.5%.
The S&P 500 typically thrives in years when the tech sector does, which has been the case for most of the past decade. Therefore, investing in SCHD isn’t about seeking explosive growth typically found in growth ETFs; it’s about securing dividends and stability in high-quality companies. Recent data revealed SCHD’s dividend yield was just slightly above its average of 3.2% over the last decade.
For potential investors pondering whether now is the right time to consider SCHD, it’s essential to assess personal investment goals. If the focus is on high-risk, high-reward stocks or seeking an ETF that consistently beats the market, SCHD may not be the best fit. Conversely, for long-term investors looking for stable income streams, now could be an opportune time to invest, given its blend of appealing dividend yield, emphasis on stability, and low expense ratio of 0.06%.
Since its inception in October 2011, SCHD has averaged annual total returns of 13.1%. Although past performance does not guarantee future results, this track record could translate into sustained growth for diligent investors. If immediate cash payouts aren’t a necessity, considering a strategy of reinvesting dividends could enhance future payouts.
Before making any decisions, potential investors should also contemplate recommendations from trusted analyst sources. For instance, some platforms have identified other stocks with high growth potential that currently overshadow SCHD’s returns.
Given the fluctuating dynamics of the market, investors are urged to exercise careful judgment when approaching investment decisions centered around SCHD or any other securities.
