SCHD: The Dividend ETF That’s Capturing Everyone’s Attention

Financial professionals are flocking to dividend ETFs, and one fund dominates their research: The Schwab U.S. Dividend Equity ETF (SCHD).

Our TrackStar data reveals SCHD garnered 1,349 searches from financial professionals last month, more than triple the attention of its closest competitor. This surge in interest comes as investors seek quality dividend payers in an uncertain market.

SCHD’s approach differs from typical dividend funds. 

Rather than simply chasing high yields, it focuses on companies with strong fundamentals and consistent dividend payments. 

This strategy has delivered both growth and income, with the fund returning 73.9% over the past five years.

But is it the right ETF for you?

Key Facts About SCHD

• Net assets: $65.9 billion
• 12-month trailing yield: 6.92%
• Inception: October 20, 2011
• Expense ratio: 0.06%
• Number of holdings: 102

SCHD tracks the Dow Jones U.S. Dividend 100 Index. This fund’s secret sauce lies in its composite scoring system, which ranks stocks on four key metrics: free cash flow to debt, return on equity, indicated annual dividend yield, and five-year dividend growth rate. 

The multi-factor approach helps identify companies with both the ability and commitment to maintain their dividend payments

Position sizes are capped at 4% and sector exposures at 25%, with daily monitoring to prevent excess concentration. This disciplined approach maintains diversification while allowing meaningful exposure to the highest-scoring companies.

Source: Schwab

The fund maintains strict diversification requirements, with sector allocations capped to prevent overconcentration. 

Currently, financials lead at 18.2%, followed by healthcare at 15.8% and consumer staples at 14.0%.

Source: Schwab

Performance

SCHD’s disciplined approach has paid off for investors. The fund’s 73.9% five-year return outpaces many of its peers while maintaining a competitive 6.92% yield.

Source: Schwab

The fund trades at 18.4x earnings with a price-to-cash-flow ratio of 10.2x, suggesting reasonable valuations despite strong performance.

The fund’s beta of 1.0 indicates market-like volatility, while its 27.9% return on equity demonstrates the quality of its holdings. 

With a low 27.5% turnover rate, the fund keeps trading costs minimal, supporting its razor-thin 0.06% expense ratio.

Competition

SCHD faces competition from several established dividend ETFs:

• Vanguard High Dividend Yield ETF (VYM): Offers broader diversification with 538 holdings but delivers a lower 2.78% yield. Its 60.7 billion in assets and 0.06% expense ratio make it SCHD’s closest competitor in size and cost.
• Vanguard Dividend Appreciation ETF (VIG): Focuses on dividend growth rather than yield, holding 340 stocks with at least 10 years of increasing dividends. Its 1.71% yield reflects this growth-oriented approach.
• iShares Core Dividend Growth ETF (DGRO): Takes a middle ground, requiring only five years of dividend growth. With 416 holdings and a 2.18% yield, it provides broader exposure at a slightly higher 0.08% expense ratio.
• SPDR Portfolio S&P 500 High Dividend ETF (SPYD): Chases yield more aggressively, resulting in a 4.09% payout but more concentrated exposure with just 82 holdings.

All of these ETFs come with high liquidity and low expenses, with most managing tens of billions of dollars.

Notably, none of these ETFs beat the S&P 500’s 5-year 105% performance.

Our Opinion 9/10 

SCHD stands out for its balance of yield, quality, and cost-efficiency. The fund’s fundamental screening process helps avoid dividend traps while maintaining an attractive payout.

The microscopic 0.06% expense ratio means more dividend income flows to investors. While concentration in about 100 stocks might concern some investors, the quality metrics and sector caps provide adequate risk management.

Best suited for income investors seeking a core U.S. equity holding, SCHD deserves its position as one of the most researched dividend ETFs among financial professionals.

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