Is the Schwab U.S. Dividend Equity ETF (SCHD) the Best Income-Focused ETF?

The world of exchange-traded funds (ETFs) offers investors a wide array of choices, from sector-specific funds to those built around global markets and unique strategies. One area that has attracted significant attention is dividend-focused ETFs, with the Schwab U.S. Dividend Equity ETF (SCHD) standing out as a popular choice.

Why SCHD Appeals to Dividend Investors

SCHD is designed to track the Dow Jones U.S. Dividend 100 Index. This index emphasizes companies with robust dividend yields, a demonstrated history of reliable and growing payouts, and strong underlying fundamentals. As a result, most holdings in SCHD are large, stable corporations with substantial cash flows.

SCHD's Largest Holdings

As of June 27, SCHD’s top 10 holdings comprise about 40% of its total assets. These positions are distributed more evenly among companies compared to indexes like the S&P 500, where a few technology giants dominate.

This "top-heavy," yet diversified, approach means SCHD has exposure to leading companies, but avoids becoming too reliant on any single stock. In comparison, funds tracking the S&P 500 or Nasdaq-100 are highly concentrated in a handful of tech names.

Another appealing aspect is SCHD’s focus on established, resilient businesses, which tend to offer more stability, especially during volatile markets.

Dividend Yield and Low Costs Give SCHD an Edge

As of June 27, SCHD’s dividend yield sits at about 3.9%, which is not only higher than its five-year average, but also more than double the S&P 500’s yield. This makes SCHD especially attractive for those seeking consistent income from their investments.

Additionally, SCHD boasts an impressively low expense ratio of just 0.06%. This means investors pay only $0.60 in annual fees for every $1,000 invested, letting more of the fund’s returns stay in your pocket. Many comparable ETFs charge higher fees, reducing long-term returns.

Is SCHD Right for Your Portfolio?

SCHD delivers a rare combination: a high dividend yield, top-tier companies, and minimal costs. It’s a compelling option for passive income seekers. However, because SCHD’s selection criteria can exclude several outstanding businesses, and its diversification is narrower than broader market ETFs, it may be best used as a complementary holding rather than a core investment.

For investors who prioritize income, SCHD remains among the most promising ETF options available today.

This content is for informational purposes only and does not constitute financial advice.