The Schwab U.S. Dividend Equity ETF (SCHD) has been a favorite among investors. Despite recent lackluster performance, many analysts maintain a positive outlook on the fund. SCHD stands out for its sensible and risk-conscious approach.
The fund contains 100 stocks that have paid dividends for at least 10 consecutive years. Companies like Pepsi and Verizon have been in the portfolio since 2017. The fund’s strict stock-selection criteria provide exposure to quality companies.
As of March 2024, nearly 65% of the portfolio held stocks with wide economic moat ratings. This is a higher share than over 90% of the fund’s category peers. Focusing on higher-yielding stocks helps keep the fund on the cheaper side of its category.
The fund weights holdings by market cap, reflecting the market’s view on each stock’s relative value. It also limits individual stock weightings to 4% and sector weightings to 25% to maintain diversification. Designed to be defensive, SCHD has shown resilience in downturns.
From its October 2011 inception through February 2025, the fund captured only 88% of its benchmark’s downside.
Schwab ETF’s risk-conscious approach
Holdings like Merck and Amgen helped the fund outperform in 2022’s declining market.
However, the fund has captured 91% of its benchmark’s upside. Its consistent approach can lead to underperformance in certain conditions. In 2023 and 2024, the fund ranked in the bottom quartile of its peer group.
Despite recent difficulties, SCHD’s overall track record remains excellent. Its risk-adjusted and absolute returns have consistently placed it in the top 10% of its category from inception through February 2025. But the recent underperformance shows that even high-quality funds can experience downturns.
Bryan Armour, CFA, notes “Schwab U.S. Dividend Equity ETF stands out for its sensible, transparent, and risk-conscious approach that should generate better long-term risk-adjusted returns than the Russell 1000 Value Index, its category benchmark.”
Technical analysis also provides insights for trading SCHD. Investors can consider buying near $25.50, targeting $26.97, with a stop loss at $25.43. Shorting slightly under $26.97, targeting $25.50, with a stop loss at $27.05 is another potential strategy.
While SCHD remains a favorite, it’s crucial for investors to manage risk. Platforms like Evitar Corte provide AI-driven warnings of potential market downturns. Staying informed of real-time updates can help navigate changing conditions.
