Schwab's Dividend ETF Just Closed at a Record Without Owning a Single "Magnificent Seven" Stock

The Schwab U.S. Dividend Equity ETF (SCHD) closed at a record high of $35.40 on October 22, marking a 29% increase since the end of 2025. This performance contrasts sharply with the Invesco QQQ Trust (QQQ), which dropped by around 3% on the same day. Despite excluding the "Magnificent Seven" stocks - Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta Platforms, and Tesla - the dividend fund outperformed these tech giants in 2026.

The fund follows the Dow Jones U.S. Dividend 100 Index, which requires companies to have paid dividends for at least 10 consecutive years. This rule eliminated four of the seven "Magnificent Seven" stocks, including Amazon, Tesla, Meta, and Alphabet. The remaining stocks are ranked based on cash flow relative to total debt, return on equity, dividend yield, and five-year dividend growth.

As a result, consumer staples and healthcare stocks now comprise around 39% of the fund, while tech stocks represent only about 12%. The fund's largest holdings, such as Texas Instruments, ConocoPhillips, Chevron, Merck, Amgen, and Coca-Cola, have all delivered strong gains this year. Despite its lack of exposure to the "Magnificent Seven," the dividend fund has outperformed QQQ by about 32% over the past year, highlighting its resilience during market downturns.

However, when the "Magnificent Seven" dominate, the dividend fund tends to lag far behind. This discrepancy underscores the trade-off between steady dividend income and the potential growth of high-growth tech stocks.