SCHD ETF: A Reliable Powerhouse for Dividend Investors

By Eugene McCombs, April 23, 2025

In the crowded world of exchange-traded funds (ETFs), the Schwab U.S. Dividend Equity ETF (SCHD) has carved out a reputation as a favorite among income-seeking investors—and for good reason. Combining a focus on quality, sustainability, and performance, SCHD offers a smart way to tap into America’s top dividend-paying companies. What is SCHD? SCHD tracks the Dow Jones U.S. Dividend 100 Index, which includes 100 high dividend-yielding U.S. stocks with a record of consistently paying dividends. The fund isn’t just about high yields—it also screens for fundamental strength, looking at metrics like return on equity, dividend growth, and cash flow.

Launched by Charles Schwab in 2011, SCHD has grown into a staple for both conservative investors and dividend growth enthusiasts alike.

Key Features

• Expense Ratio: 0.06% (very low, meaning more of your money stays invested)

• Dividend Yield: Typically hovers around 3-4% (as of recent years)

• Holdings: Includes blue-chip companies like PepsiCo, Merck, Coca-Cola, Home Depot, and Verizon

• Rebalancing: Annual, with quality screens updated yearly

Why Investors Love SCHD

• Consistency: SCHD focuses on companies that not only pay dividends, but grow them—ideal for compounding returns.

• Tax Efficiency: Like most ETFs, it's more tax-efficient than mutual funds.

• Low Fees: With one of the lowest expense ratios in the space, SCHD is cheap to own.

• Total Return: It’s not just about income—SCHD has shown strong total return performance compared to other dividend ETFs.

Potential Drawbacks

• Sector Concentration: Heavy weight in sectors like industrials, consumer staples, and financials, which may lag in high-growth markets.

• No International Exposure: SCHD focuses solely on U.S. companies.

• Not Ideal for Short-Term Growth: It's more about long-term, slow-and-steady growth.

Who is SCHD For?SCHD is great for:

• Retirees or near-retirees seeking steady income

• Investors looking for dividend growth over time

• Anyone wanting exposure to U.S. blue-chip stocks with solid fundamentals

Bottom Line: The Schwab U.S. Dividend Equity ETF is a rock-solid choice for those looking to build wealth through dividends without paying high fees. Its blend of quality, income, and simplicity makes it a long-term winner in many portfolios.