In its 2024 annual rebalance, SCHD removed Broadcom from its portfolio, a decision that contributed to a 5.2% relative underperformance versus the benchmark over the six weeks following the change. The absence of AVGO, which had represented more than 1.8% of the fund’s weighting, proved costly as the semiconductor giant rallied 7% in the immediate period after rebalance announcements. This episode highlighted SCHD’s concentration risk, given its roughly 100-stock portfolio and a top-10 position that can exceed 30% of net assets when large dividend payers outperform.

SCHD’s total return trailed the broader market by 2.4% over the past 12 months as the Federal Reserve’s four rate hikes lifted the 10-year Treasury yield from 3.5% to above 4.3%. The fund’s low-beta profile of 0.68 versus the S&P 500 dampened equity upside during the rally but magnified losses when yields spiked. Financial sector holdings, which account for 24% of assets, underperformed when higher discount rates compressed bank valuations, underscoring SCHD’s sensitivity to interest-rate volatility even as it screens for dividend sustainability.

Despite recent headwinds, SCHD offers an attractive income profile, delivering a trailing dividend yield of 3.7% compared with the 2.9% average of high-dividend peers over the past decade. Its 0.06% expense ratio and disciplined dividend-growth screen have enabled the fund to increase payouts at a 7% annualized rate since inception in 2011. For income-focused investors, this translates into $37,000 of annual distributions on a $1 million investment, nearly 20% more cash flow than a comparable position in a broad-market dividend ETF.