Why SCHD Deserves a Closer Look From Investors

Published: Friday, September 5, 2025 at 10:20 am

SCHD: A Value Play in a Growth-Driven Market

As the market continues its upward trajectory, fueled largely by technology stocks, many investors find their portfolios heavily weighted towards growth. However, market cycles dictate that value stocks will eventually regain prominence. This shift presents an opportunity to diversify and potentially bolster portfolios with a value-oriented exchange-traded fund (ETF) like the Schwab U.S. Dividend Equity ETF (SCHD).

SCHD focuses on companies with consistent free cash flow and a history of increasing dividends, offering a different approach compared to those prioritizing revenue growth. The ETF holds approximately 100 companies, selected based on their financial strength and dividend-paying track record. The Dow Jones U.S. Dividend 100 Index, which SCHD tracks, uses four key metrics to assess dividend quality: cash flow to total debt, return on equity, forward dividend yield, and five-year dividend growth rate. This screening process aims to identify businesses with robust balance sheets and cash flows, capable of weathering economic downturns while maintaining and increasing dividend payouts.

The ETF currently yields close to 4%, an attractive feature for both those reinvesting dividends and those seeking income. Over the past decade, SCHD has delivered an annualized return of approximately 11.1%, outperforming many other value-focused funds. With an expense ratio of only 0.06%, a significant portion of the returns remains with the investor.

SCHD's composition leans towards sectors like consumer staples, healthcare, and financials, which tend to have more stable earnings streams. This provides a degree of predictability, and the consistent growth of dividends can accumulate over time. The ETF is particularly well-suited for retirees seeking income and stability in a volatile market. However, younger investors can also benefit from SCHD by reinvesting dividends, which can create a compounding effect, aiding in long-term wealth accumulation. The fund's annual reconstitution simplifies the investment process, making it suitable for a dollar-cost averaging strategy.

BNN's Perspective:

While the allure of high-growth stocks is undeniable, a balanced portfolio is crucial for long-term financial health. SCHD offers a compelling option for investors seeking diversification and a potential hedge against market volatility. Its focus on dividend-paying companies provides a stream of income and a degree of stability that can be particularly valuable during market corrections. While not a replacement for growth investments, SCHD represents a prudent addition to a well-rounded portfolio.

Keywords: SCHD, ETF, dividend stocks, value stocks, growth stocks, investment, portfolio diversification, income, market cycles, financial stability, Dow Jones U.S. Dividend 100 Index, expense ratio, returns, retirees, dollar-cost averaging

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