The Schwab U.S. Dividend Equity ETF (SCHD) has gained attention from investors seeking a reliable and defensive investment option. The ETF has demonstrated solid performance, rising 14.35% over the past year, despite a slight decline of 0.19% in the past five days. SCHD tracks the Dow Jones U.S. Dividend 100 Index and boasts nearly $70 billion in assets under management.
The fund focuses on the quality and sustainability of dividends, investing in stocks selected for their fundamental strength relative to their peers. With 100 stocks in its portfolio, SCHD is reasonably diversified, with its top 10 holdings accounting for 42.8% of its assets. The ETF primarily invests in blue-chip U.S. dividend stocks across various industries and sectors, including consumer staples giants like Coca-Cola and Pepsi, healthcare and pharma stocks like AbbVie and Pfizer, and dividend-paying tech stocks like Cisco and Texas Instruments.
One of the main advantages of SCHD is the relatively low valuation of its holdings compared to the broader market. The S&P 500 trades at nearly 26 times trailing 12-month earnings, while SCHD’s portfolio trades at just 17 times earnings, making it about one-third cheaper. This inexpensive valuation, combined with the fund’s strong dividend yield, provides a strong defense against market volatility and pullbacks.
SCHD is an excellent choice for dividend seekers, with a yield significantly higher than the S&P 500’s 1.3%.
Strong returns and reliable dividends
The fund has also increased its dividend payout for 13 consecutive years.
Moreover, SCHD features a remarkably low expense ratio of just 0.06%, allowing investors to maximize their returns over time by minimizing fees. Over the long term, SCHD has delivered solid performance. As of January 31, the fund has generated a five-year annualized return of 11.9% and a ten-year annualized return of 11.6%.
While slightly underperforming the broader market, SCHD’s consistent, double-digit annualized returns demonstrate its reliability. According to TipRanks’ unique ETF analyst consensus, SCHD is currently rated as a Moderate Buy. The Street’s average price target of $31.75 implies an upside potential of 12.7%.
Among SCHD’s holdings, Guess?, Inc., Nexstar Media Group, and Leggett & Platt have the highest upside potential, while The Hershey Company, Bank of Hawaii, and Paychex have the greatest downside potential. In conclusion, SCHD is a solid choice for long-term investors seeking to mitigate market volatility and invest in a diversified group of inexpensive, blue-chip dividend stocks. The ETF’s strategy aims to maximize returns while minimizing risk, making it an appealing option for conservative and risk-averse investors.
