Key Takeaways
- SCHD tracks the Dow Jones U.S. Dividend 100 Index, focusing on companies with at least 10 consecutive years of dividend payments and strong fundamentals like cash flow, return on equity, and dividend growth.
- The ETF has increased its annual dividend payout every year since its 2011 inception—a 14-year streak—with a 10-year dividend compound annual growth rate (CAGR) of approximately 11%.
- With a current yield around 3.7% and an expense ratio of just 0.06%, SCHD offers one of the most cost-effective ways to access quality dividend-paying stocks.
- Recent underperformance versus the S&P 500 stems from SCHD’s methodology—the fund lacks exposure to high-flying tech stocks and was forced to remove Broadcom (AVGO) in March 2024 after its price surge compressed its yield.
- SCHD’s top sectors include energy (~20%), consumer staples (~18%), and healthcare (~16%), providing defensive positioning during market volatility while sacrificing some upside during tech-led rallies.
- The fund holds approximately 100 stocks with the top 10 holdings representing about 41% of assets, including names like Lockheed Martin, Bristol-Myers Squibb, Chevron, and Coca-Cola.
Table of Contents
- What Is SCHD?
- How SCHD Works: The Dow Jones U.S. Dividend 100 Index
- SCHD Current Holdings and Sector Allocation
- SCHD Dividend History and Growth
- SCHD Performance: Addressing the “Dead Money” Narrative
- The Broadcom Effect: Why SCHD Lagged in 2024-2025
- SCHD vs. VYM vs. DGRO: How It Compares
- Pros and Cons of Investing in SCHD
- Who Should Consider SCHD?
- Frequently Asked Questions
Few ETFs have captured the imagination of dividend investors quite like the Schwab U.S. Dividend Equity ETF. With over $75 billion in assets under management, SCHD has become a cornerstone holding for investors seeking a combination of income, quality, and long-term growth.
But the past few years have tested the patience of SCHD shareholders. While the S&P 500 posted consecutive years of double-digit gains driven by technology stocks and AI enthusiasm, SCHD lagged behind. Reddit forums and investment communities have buzzed with debate: Is SCHD “dead money,” or is it simply doing exactly what it was designed to do?
This comprehensive guide examines everything you need to know about SCHD—its methodology, holdings, dividend track record, recent performance challenges, and how it fits within a dividend growth investing strategy.
What Is SCHD?
The Schwab U.S. Dividend Equity ETF (SCHD) is a passively managed exchange-traded fund that seeks to track the performance of the Dow Jones U.S. Dividend 100 Index. Launched on October 20, 2011, the fund invests in approximately 100 high-quality, dividend-paying U.S. companies selected for both their income characteristics and fundamental strength.
Unlike dividend ETFs that simply chase the highest yields—which can lead to “yield traps” from financially distressed companies—SCHD’s methodology emphasizes dividend sustainability and quality. The result is a portfolio of established businesses with proven track records of returning cash to shareholders.
SCHD at a Glance
| Characteristic | Detail |
|---|---|
| Ticker Symbol | SCHD |
| Fund Inception | October 20, 2011 |
| Index Tracked | Dow Jones U.S. Dividend 100 Index |
| Expense Ratio | 0.06% |
| Assets Under Management | ~$76 billion |
| Number of Holdings | ~102 |
| Dividend Yield (TTM) | ~3.7% |
| Dividend Frequency | Quarterly |
| P/E Ratio | ~16 |
One notable event: In October 2024, SCHD underwent a 3-for-1 stock split. This didn’t change the fund’s value or investment characteristics—shareholders simply received three shares for every one they held, while the price per share decreased proportionally. The split made the ETF more accessible to smaller investors and enhanced options trading activity.
How SCHD Works: The Dow Jones U.S. Dividend 100 Index
Understanding SCHD requires understanding its underlying index. The Dow Jones U.S. Dividend 100 Index uses a multi-step screening process that goes far beyond simply selecting high-yielding stocks.
Step 1: Universe Definition
The selection process begins with the Dow Jones U.S. Broad Market Index. From this universe, the index excludes:
- REITs (Real Estate Investment Trusts)
- MLPs (Master Limited Partnerships)
- Preferred stocks
- Convertible securities
This focus on traditional corporations—rather than pass-through entities—keeps the portfolio concentrated on companies with conventional dividend policies and corporate structures.
Step 2: Dividend History Screen
Companies must have paid dividends for at least 10 consecutive years. This requirement immediately eliminates younger companies, cyclical businesses that cut dividends during downturns, and speculative firms with inconsistent payout policies.
Step 3: Size and Liquidity Requirements
Eligible companies must have a minimum float-adjusted market capitalization of $500 million and meet liquidity thresholds based on trading volume. These requirements ensure the index can be efficiently tracked by ETFs like SCHD without market impact issues.
Step 4: Fundamental Quality Ranking
This is where SCHD’s methodology truly differentiates itself. Companies meeting the above criteria are ranked using a composite score based on four fundamental factors:
- Cash flow to total debt ratio: Measures a company’s ability to cover its debt obligations using operating cash flow—an indicator of financial health.
- Return on equity (ROE): Measures how efficiently a company generates profits from shareholder capital—a quality indicator.
- Dividend yield: The current income return provided by the stock.
- 5-year dividend growth rate: A forward-looking measure of dividend momentum and commitment to growing shareholder payouts.
The top 100 companies by composite score are selected for the index.
Step 5: Weighting and Rebalancing
Unlike some dividend ETFs that weight by yield (which can overweight risky, high-yield stocks), SCHD uses a modified market capitalization weighting approach. Important constraints include:
- Individual stock cap: No single position can exceed 4% of the index at rebalancing
- Sector cap: No single sector can exceed 25% of the index
- Annual reconstitution: Full index review occurs each March
- Quarterly rebalancing: Weights are adjusted back to targets each quarter
These rules prevent excessive concentration while maintaining the income and quality characteristics the index targets.
SCHD Current Holdings and Sector Allocation
SCHD’s portfolio reflects its focus on established, financially strong dividend payers. As of January 2026, the fund’s composition shows a distinct tilt toward defensive and value-oriented sectors.
Top 10 Holdings
| Company | Ticker | Sector | Weight |
|---|---|---|---|
| Lockheed Martin | LMT | Industrials | ~4.6% |
| Bristol-Myers Squibb | BMY | Healthcare | ~4.2% |
| Chevron | CVX | Energy | ~4.2% |
| Merck | MRK | Healthcare | ~4.1% |
| ConocoPhillips | COP | Energy | ~4.1% |
| Home Depot | HD | Consumer Cyclical | ~4.0% |
| Altria Group | MO | Consumer Staples | ~4.0% |
| Texas Instruments | TXN | Technology | ~3.9% |
| Coca-Cola | KO | Consumer Staples | ~3.8% |
| PepsiCo | PEP | Consumer Staples | ~3.8% |
The top 10 holdings represent approximately 41% of the fund—a moderate concentration level that balances conviction with diversification.
Sector Allocation
SCHD’s sector allocation differs significantly from the S&P 500, which is heavily weighted toward technology. This composition explains much of the fund’s recent relative performance.
| Sector | SCHD Weight | S&P 500 Weight | Difference |
|---|---|---|---|
| Energy | ~20% | ~3% | +17% |
| Consumer Staples | ~18% | ~6% | +12% |
| Healthcare | ~16% | ~12% | +4% |
| Industrials | ~11% | ~9% | +2% |
| Consumer Discretionary | ~10% | ~10% | 0% |
| Financials | ~9% | ~14% | -5% |
| Technology | ~9% | ~32% | -23% |
| Communication Services | ~4% | ~9% | -5% |
SCHD’s 23-percentage-point underweight to technology is the single largest sector difference versus the S&P 500. During periods when tech stocks dominate (like 2023-2025), this creates a significant performance headwind. Conversely, during market corrections or periods favoring value and defensive stocks (like 2022), SCHD can outperform.
SCHD Dividend History and Growth
One of SCHD’s most impressive characteristics is its track record of growing dividends every single year since inception. This 14-year streak of annual dividend increases is remarkable for an ETF—most funds see fluctuations as their underlying holdings change.
Annual Dividend Growth
| Year | Annual Dividend (Split-Adjusted) | YoY Growth |
|---|---|---|
| 2012 | $0.36 | — |
| 2013 | $0.40 | +11% |
| 2014 | $0.44 | +10% |
| 2015 | $0.49 | +11% |
| 2016 | $0.53 | +8% |
| 2017 | $0.57 | +8% |
| 2018 | $0.61 | +7% |
| 2019 | $0.70 | +15% |
| 2020 | $0.74 | +6% |
| 2021 | $0.79 | +7% |
| 2022 | $0.86 | +9% |
| 2023 | $0.92 | +7% |
| 2024 | $1.00 | +9% |
| 2025 | $1.05 | +5% |
Note: Figures are approximate and adjusted for the October 2024 3-for-1 split.
From 2012 to 2025, SCHD’s annual dividend has grown from approximately $0.36 per share to $1.05—an increase of nearly 200%. The 10-year compound annual growth rate (CAGR) for dividends has averaged approximately 11%, though recent years have seen somewhat slower growth as the portfolio shifted toward more defensive holdings.
For a deeper understanding of how dividend yield is calculated and what it means for your returns, see our dividend yield calculator and guide.
Dividend Consistency
ETF dividends can fluctuate quarter-to-quarter based on the payout timing of underlying holdings. SCHD’s quarterly dividends aren’t perfectly uniform, but the annual total has increased every year. The fourth quarter dividend is typically the largest, as many companies declare special or increased year-end dividends.
SCHD’s dividends are generally classified as qualified dividends, which receive preferential tax treatment for investors in taxable accounts—an important consideration compared to bond interest or non-qualified dividends.
SCHD Performance: Addressing the “Dead Money” Narrative
Let’s address the elephant in the room: SCHD has meaningfully lagged the S&P 500 over the past three years. This underperformance has led to heated debates about whether the fund is “broken” or simply experiencing a period where its strategy is out of favor.
Recent Performance Numbers
| Period | SCHD Total Return | S&P 500 Total Return | Difference |
|---|---|---|---|
| 2022 | -3% | -18% | +15% |
| 2023 | +4% | +26% | -22% |
| 2024 | +12% | +26% | -14% |
| 2025 | +6% | +26% | -20% |
| 10-Year Annualized | +11% | +13% | -2% |
| Since Inception (2011) | +12% | +14% | -2% |
Note: Returns are approximate total returns including dividends.
Understanding the Underperformance
Context matters enormously here. The 2023-2025 period represented one of the most concentrated market rallies in history, with the “Magnificent Seven” technology stocks (Apple, Microsoft, NVIDIA, Amazon, Alphabet, Meta, Tesla) driving the vast majority of S&P 500 returns. SCHD, by design, has minimal exposure to these companies.
Consider this: in 2022, when the S&P 500 fell 18%, SCHD only dropped about 3%—outperforming by 15 percentage points. The fund did exactly what it was designed to do: provide downside protection and income stability during market turmoil.
The challenge is that 2022’s defensive outperformance was followed by three consecutive years where growth stocks led and defensive dividend payers lagged. For investors who measure success purely by total return versus the S&P 500, SCHD has been frustrating. For investors who prioritize income and downside protection, the fund has continued delivering on its mandate.
The Broadcom Effect: Why SCHD Lagged in 2024-2025
One specific event significantly impacted SCHD’s recent performance: the forced removal of Broadcom (AVGO) during the March 2024 annual reconstitution.
What Happened
Broadcom had been one of SCHD’s largest and best-performing holdings. However, the company’s stock price surged dramatically during the AI boom—from around $60 in early 2023 to over $180 by early 2024 (split-adjusted). As the price rose, Broadcom’s dividend yield compressed from over 3% to under 1.7%.
SCHD’s index methodology ranks companies partly by dividend yield. As Broadcom’s yield fell, its composite score declined, and it was ultimately removed from the index. Bristol-Myers Squibb and other healthcare names replaced it.
The Performance Impact
After removal, Broadcom continued surging—the stock more than doubled from its exit price through 2025. SCHD investors watched one of the decade’s best-performing stocks leave the fund, only to see it continue climbing.
This isn’t a flaw in SCHD’s methodology—it’s the methodology working as designed. According to Seeking Alpha analysis, a stock that rallies so hard its yield falls is gradually penalized in SCHD’s scoring system. Broadcom became a victim of its own success; dividend-centric screening would always push it out eventually.
The Broadcom situation illustrates a fundamental trade-off in SCHD’s approach: the fund will occasionally miss out on momentum-driven winners that outgrow their dividend characteristics. The flip side is that it avoids yield traps—companies whose high yields reflect distress rather than strength.
SCHD vs. VYM vs. DGRO: How It Compares
SCHD isn’t the only dividend ETF available. Understanding how it compares to alternatives helps investors determine which fund best fits their goals. For detailed comparisons, see our guides on SCHD vs. VYM and SCHD vs. FDVV.
SCHD vs. VYM (Vanguard High Dividend Yield ETF)
| Characteristic | SCHD | VYM |
|---|---|---|
| Holdings | ~100 | ~550 |
| Expense Ratio | 0.06% | 0.06% |
| Current Yield | ~3.7% | ~2.7% |
| Index | Dow Jones U.S. Dividend 100 | FTSE High Dividend Yield |
| Selection Method | Quality + Yield composite | Yield-based |
| Top Holding | Lockheed Martin | Broadcom |
| Overlap | ~19% by weight | |
VYM takes a broader approach, holding over 500 stocks with less stringent quality screening. Importantly, VYM still holds Broadcom as its largest position—which explains much of its recent outperformance versus SCHD. For investors wanting both, the 19% overlap means they provide reasonable diversification from each other.
SCHD vs. DGRO (iShares Core Dividend Growth ETF)
| Characteristic | SCHD | DGRO |
|---|---|---|
| Holdings | ~100 | ~400 |
| Expense Ratio | 0.06% | 0.08% |
| Current Yield | ~3.7% | ~2.3% |
| Focus | Quality + High Yield | Dividend Growth |
| Dividend History Requirement | 10 years | 5 years |
DGRO focuses more heavily on dividend growth rather than current yield, resulting in a lower yield but more technology exposure. It’s a reasonable complement to SCHD for investors wanting to balance current income with growth potential.
Pros and Cons of Investing in SCHD
Advantages
- Quality methodology: The multi-factor screening process selects companies with strong fundamentals, not just high yields. This reduces the risk of dividend cuts and “yield traps.”
- 14-year dividend growth streak: Few ETFs can match SCHD’s consistency in increasing annual payouts every single year since inception.
- Rock-bottom expense ratio: At 0.06%, SCHD is among the cheapest dividend ETFs available. On a $100,000 investment, you’d pay just $60 annually in fees.
- Attractive current yield: The ~3.7% yield is roughly triple the S&P 500’s yield, providing meaningful income for investors who need it.
- Defensive characteristics: The portfolio’s tilt toward energy, healthcare, and consumer staples has historically provided downside protection during market corrections.
- Tax efficiency: Qualified dividends and low turnover make SCHD relatively tax-efficient compared to actively managed income funds.
Disadvantages
- Underperformance during growth rallies: SCHD’s methodology ensures it will lag during periods dominated by low-yielding growth stocks, as seen in 2023-2025.
- Sector concentration: Heavy allocations to energy and defensive sectors create meaningful sector bets that can hurt when those sectors underperform.
- Loss of winners: The Broadcom situation demonstrates how SCHD’s rules can force the sale of successful holdings that outgrow their dividend characteristics.
- Moderate concentration: With 41% in the top 10 holdings, individual company performance can meaningfully impact returns.
- No international exposure: SCHD holds only U.S. companies, providing no diversification into international dividend payers.
Who Should Consider SCHD?
SCHD isn’t right for everyone. It’s most appropriate for investors who:
- Prioritize income: If you need or want regular dividend payments—whether for retirement income, to supplement other investments, or to reinvest—SCHD delivers meaningfully more income than broad market funds.
- Value quality over speculation: The fund’s methodology aligns with dividend investing philosophies that emphasize sustainable, growing payouts from financially strong companies.
- Have a long time horizon: Short-term underperformance is inherent to any factor-based strategy. SCHD’s benefits compound over decades, not quarters.
- Want portfolio ballast: As part of a diversified portfolio, SCHD can provide stability and income during market volatility, balancing more aggressive growth holdings.
- Understand the trade-offs: Investors who accept that SCHD will lag during tech-driven rallies but potentially outperform during corrections and value rotations.
SCHD may be less appropriate for investors who:
- Benchmark performance strictly against the S&P 500
- Have a short investment horizon
- Want maximum growth regardless of income
- Need international diversification from a single fund
Frequently Asked Questions
SCHD remains a high-quality dividend ETF that has delivered on its core mandate: providing above-market yield, growing dividends, and exposure to financially strong companies. Whether it’s “good” depends on your goals. For income-focused investors with a long time horizon, SCHD’s quality methodology and track record remain compelling. However, if tech and growth stocks continue leading the market, SCHD will likely continue to lag total return benchmarks. Early 2026 has shown some rotation toward value stocks, which could benefit SCHD, but predicting short-term sector performance is inherently uncertain.
Two primary factors drove SCHD’s underperformance: lack of technology exposure and the forced removal of Broadcom. The “Magnificent Seven” tech stocks generated outsized returns during this period, and SCHD holds virtually none of them. Additionally, when Broadcom’s surging price compressed its yield, the stock was removed from the index in March 2024—right before it continued climbing. SCHD’s methodology prioritizes current yield and dividend sustainability, which structurally underweights momentum-driven growth stocks.
No—but expectations need to be calibrated. SCHD continues growing its dividend annually, providing a yield triple that of the S&P 500, and holding financially strong companies. The “dead money” perception stems from comparing SCHD’s total return to a tech-driven S&P 500. If your goal is maximum total return with no regard for income, broad market index funds have been better recently. If your goal is growing income from quality companies, SCHD continues delivering. The fund did its job in 2022 when it outperformed by 15 percentage points during the market decline.
VYM’s recent outperformance is largely explained by its Broadcom holding—the same stock SCHD was forced to remove. This creates recency bias: VYM looks better now because one stock happened to surge after SCHD removed it. Looking at longer periods, SCHD and VYM have delivered similar total returns with SCHD providing higher yield. They also have only ~19% overlap, making them reasonable complements rather than direct substitutes. Selling SCHD to chase VYM’s recent performance is a classic case of “buying high” after a divergence.
There’s no universal answer—it depends on your age, risk tolerance, income needs, and overall portfolio composition. Some investors use SCHD as a core equity holding (30-50% of equities). Others use it as a satellite position (10-20%) to complement growth-oriented holdings. Retirees focused on income might allocate more heavily, while younger investors prioritizing growth might allocate less. Consider how SCHD’s sector exposures interact with your other holdings to avoid unintended concentration.
Yes, SCHD’s dividends are generally classified as qualified dividends, which receive preferential tax treatment (taxed at long-term capital gains rates rather than ordinary income rates). This makes SCHD relatively tax-efficient for taxable accounts compared to bond funds or REITs. However, holding SCHD in a tax-advantaged account like an IRA or 401(k) eliminates the qualified dividend advantage, so consider your overall tax situation when deciding account placement.
SCHD pays quarterly dividends, typically in March, June, September, and December. The ex-dividend date (the date you must own shares by to receive the dividend) is usually in the second week of the payment month. The payment date follows approximately one week later. For tracking ex-dividend dates and understanding their importance, see our guide.
SCHD’s underlying index reconstitutes annually each March, when the full universe is re-screened and holdings may be added or removed. Quarterly rebalancing in June, September, and December adjusts position weights back to targets without adding or removing holdings. The March reconstitution typically sees the most significant changes, as happened with Broadcom’s removal in 2024. Investors should expect some turnover but generally lower than actively managed funds.
This article is for educational purposes only and does not constitute investment advice. Investors should conduct their own research and consider consulting with a financial advisor before making investment decisions. Past performance does not guarantee future results.
