The Schwab U.S. Dividend Equity ETF (SCHD) has endured three consecutive years of relative underperformance as investors poured capital into technology and AI-driven growth stocks. Between 2023 and 2025, SCHD trailed Morningstar’s Large Value category by an average of 4 percentage points per annum, despite attracting over $15 billion in net inflows during that period. Its core allocation to industrials, consumer staples and financials has failed to keep pace with the Magnificent Seven–led rally, leaving yield-focused positions out of favor.

At its most recent rebalance, SCHD offered a portfolio yield near 3.7%, supported by strict dividend-growth and quality screens. Yet that level no longer commands a premium: money-market instruments and short-duration Treasury bills currently deliver comparable yields with virtually no volatility. As a result, retail and institutional allocators have shifted nearly $8 billion out of dividend-focused strategies into fixed-income products since mid-2024, eroding SCHD’s relative appeal as an income proxy.

A sustainable turnaround for SCHD hinges on several potential catalysts: a broad market rotation away from mega-cap tech into value, a sharp correction that elevates defensive equities, or a supply-disrupting shock in energy to justify its overweight position. Early 2026 has shown tentative signs of value leadership, with dividend payers marginally outperforming the S&P 500 in January. However, without clear evidence of sustained sector breadth expansion or renewed fixed-income drawdown, the ETF’s three-year drag remains intact and investor skepticism persists.