Schwab's Dividend ETF Keeps Hitting Records. I'd Still Buy It Now.
Its yield has slipped under 3%. How did buyers do the last time a strong year left it there?
As of October 30, the Schwab U.S. Dividend Equity ETF (SCHD) reached a record close of $35.78, trading near $36. Over the past year, the fund has seen a 31% increase in price, while the S&P 500 has gained 11%. Including dividends, SCHD has delivered around 34% returns, making it the best year since its inception in 2011. However, a higher share price results in a lower yield for new investors.
Despite this, the fund's yield stands at about 2.9%, slightly lower than mid-October's 3.1% and 2025's 3.8%. The fund's dividend is not set internally but rather passes on dividends from 102 holdings, minus a 0.06% expense ratio. The last four quarterly payments totaled about $1.05 per share, equating to a 2.9% yield at the current price.
Purchasing $1,000 of SCHD now would yield roughly $29 annually, compared to $38 in 2021. The fund has also faced challenges before; by September 2022, its price dropped 18% from 2021 levels, and it didn't surpass the 2021 close until July 2024. Yet, even with that decline, reinvested dividends still led to a 58% gain over 2022. Currently, the fund's price-to-earnings ratio is around 18, lower than the S&P 500's 25, and its dividend yield is approximately 3.2%, higher than the broad market's 1%.
Despite the potential for a payout slowdown, SCHD's lower valuation, strong past performance, and potential for future growth make it a compelling buy at the current price.
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