SCHD ETF is a value investor’s dream: but is it a good buy?


The Schwab US Dividend Equity ETF (SCHD) is one of the most popular funds among income investors for its long track record of strong dividend growth. It has grown its assets under management to over $55 billion, making it one of the biggest funds in the industry. 

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Good value stocks at a reasonable price

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The SCHD ETF is made up of 103 companies across most sectors in the American economy like financials, healthcare, consumer staples, industrials, and energy. 

Most of these companies have a long history of dividend growth, free cash flow generation, and market share gains. Some of the top firms in the ETF are Texas Instrument, Amgen, Lockheed Martin, PepsiCo, Chevron, and Coca-Cola.

Texas Instrument is a giant manufacturer of telecommunication components like data converters, amplifiers, and digital isolators that are used to power most industries today. Amgen is a major pharmaceutical company that is entering into the weight loss industry. 

Lockheed Martin is one of the biggest companies in the military-industrial complex while PepsiCo and Coca-Cola are the biggest beverage companies in the world. The other standout names in the SCHD ETF are Blackrock, Ford, Darden Restaurants, and Packaging Corp of America.

The SCHD is a bargain compared to the broader market. Our calculation found that it was trading at a price-to-earnings ratio of about 15, which is much lower than the S&P 500 index average of 23.

Most notably, the ETF has made money in 9 of its 12 years of existence and is now nearing its all-time high of $80.87. This performance makes it a popular Sleep Well at Night (SWAN) ETF among investors.

Is SCHD ETF a good buy?

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Now, the question is whether the SCHD ETF is a good asset to buy for long-term investors. When doing this assessment, I believe that the best approach is to look at its total return and compare it with the top benchmark funds like SPY and QQQ.

For beginners, total return is a figure that looks at the stock price gains and dividends. The chart below shows the annual return per year since its inception. 

SCHD history

SCHD annual returns

Now, lets compare it with the returns of the SPDR S&P 500 ETF since 2012. In this, we see that 2013 was its best year as it returned 32.89% compared to SPY’s 32.3%. Its worst annual performance was in 2018 when it dropped by 5.56%. On the other hand, the SPY’s worst performance was in 2022 when it dropped by 18% in a year that the SCHD dropped by 3.23%.

SPY ETF history

SPY ETF annual returns

Additionally, we see that the SPY ETF has had just 2 down years while the SCHD has had three. On the chart below, we see the price returns of the two assets, which show a close correlation. This is important since unlike the SPY, SCHD ETF does not have a lot of technology companies.


SCHD vs SPY price returns

Past performance is not always a good indication of what will happen in the future. Nonetheless, I believe that the SCHD is a good investment for long-term investors as it has lived to its hype before.

However, in my opinion, I would prefer to allocate more money on the mainstream ETFs like SPY and QQQ and a small portion to SCHD. 


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