Schwab U.S. Dividend ETF Lags S&P and Nasdaq with 21% Return vs Indices, Trades at 17x Earnings
Since September 2023 Schwab U.S. Dividend ETF has gained 21%, lagging the S&P 500’s 54.6% and Nasdaq’s 67.7%, leading Crude Value Insights to reaffirm a sell rating despite its 3.79% yield. Conversely, the fund trades at 17x earnings with a 3.7% dividend yield and top holdings like Bristol Myers Squibb.
1. Persistent Underperformance Raises Red Flags
Since September 2023, the Schwab U.S. Dividend Equity ETF has generated a total return of just 21%, trailing the S&P 500’s 54.56% and the NASDAQ’s 67.71%. Despite a current dividend yield near 3.8% and a focus on large, established dividend payers, SCHD’s selective portfolio has failed to keep pace with broad-market benchmarks. Investors should note that this structural underperformance spans multiple market environments, calling into question the fund’s ability to deliver competitive total returns going forward.
2. Attractive Valuation and Income Profile
After underperforming in the past year—up only 1% versus the S&P 500’s roughly 17% gain—SCHD now trades at an average multiple near 17 times earnings, compared to the broader market’s 25 times. With a 3.7% dividend yield, the fund offers a significantly higher income stream than the market average. Its holdings boast strong dividend growth records: the index-tracked universe increased payouts by 8.4% annually over the last five years, and portfolio companies have cumulatively extended dividend streaks into multiple decades.
3. High-Quality Holdings Support Long-Term Growth
SCHD’s top allocations include companies that have raised dividends for well over a decade. Its largest position, a pharmaceutical firm with a 4.2% fund weight, has increased its payout for 17 consecutive years and holds a current yield near 4.7%. A major defense contractor, representing 4.1% of assets, has raised dividends annually for 23 years and yields approximately 2.8%. Such high-quality names underpin the fund’s historical annualized returns of over 10% across three-, five- and ten-year periods since its 2011 inception.
4. Weighing Sell Ratings Against Long-Term Prospects
Some analysts maintain sell recommendations, citing persistent underperformance versus major indexes and questioning future upside. Others highlight SCHD’s discounted valuation, robust 3.7% yield and proven dividend-growth strategy as compelling entry points for investors seeking income plus capital appreciation. Ultimately, the decision hinges on whether one prioritizes recent relative weakness or the fund’s track record of generating double-digit annualized returns over market cycles.