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SCHD Yield Drops: Is This Your New Dividend Reality?
31 Aug
Summary
- SCHD has returned 29% year to date, near its 52-week high.
- The ETF's yield has fallen to approximately 3.1%.
- SCHD now faces tough competition from 4.7% 10-year Treasuries.
The Schwab U.S. Dividend Equity ETF (SCHD) has experienced a remarkable year-to-date return of 29%, trading near its 52-week high. This surge has caused its trailing distribution yield to decrease to approximately 3.1%, a level not seen in years.
This performance shift presents a new challenge for dividend investors. Fresh capital invested in SCHD now faces a less generous income stream compared to long-term holders. The fund's yield is also struggling to compete with the 4.7% offered by 10-year U.S. Treasury bonds.
SCHD tracks the Dow Jones U.S. Dividend 100 Index, focusing on companies with stable dividends, strong cash flow, high return on equity, and reasonable yields. Its portfolio includes quality companies like Qualcomm, Texas Instruments, and Coca-Cola, aiming to provide rising income with a low 0.06% expense ratio.
The ETF's strategy relies on dividends and modest capital appreciation, avoiding complex financial instruments. Historically, SCHD has delivered a 242% return over ten years, aligning with expected compounding from dividend-growth investments.
