"Currently, the ETF pays a hefty 3.9% yield. That's meaningfully more than other ETFs and options, like the VOO, and SPY which track the S&P 500 which pay out 1.25%. But that conservatism has come at a price. The S&P 500 has just hit an all-time high and is up 14% YTD already, while the Nasdaq is doing even better, just hitting 18% YTD returns. And during this bull market the Schwab US Dividend Equity ETF has more or less returned 0.0% year-to-date. Exactly flat."
"It just comes down to the assets SCHD holds and how they structure the ETF. First, no single stock can exceed 4% of the index's total weight. Take a look at the top four positions below: Most have had a pretty good year! But unfortunately, now all of them exceed the 4% threshold so in the upcoming rebalancing of the ETF will have to be trimmed out."
"The ETF also holds some total dogs as well, including shares in chronic under-performer Target, which is down 35% YTD, PepsiCo which is down 6.3% YTD, and United Parcel Services (UPS), which is down 31% YTD. And the disappointment doesn't end there. Over the last 5 years the ETF is only up 39%. While that may sound great at first, the S&P 500 is up 93% over the same period. Add it all up and you have a high yielding, diversified disappointment for investors."
The Schwab US Dividend Equity ETF holds nearly $70 billion in assets and yields about 3.9%, significantly above S&P 500 trackers like VOO and SPY at roughly 1.25%. Despite the yield, SCHD is essentially flat year-to-date while the S&P 500 and Nasdaq are up approximately 14% and 18% respectively. A rule limiting any single holding to 4% forces rebalancing that trims top performers and constrains sector exposure. The fund contains notable YTD losers such as Target, PepsiCo, and UPS. Over five years SCHD returned 39% versus the S&P 500's 93%, leaving income insufficient to offset underperformance.
Read at 24/7 Wall St.
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