"The Schwab US Dividend Equity ETF ( NYSEARCA:SCHD) is one of the most well-known dividend ETFs. It has produced a 45% return over the past five years and boasts a 3.75% SEC yield. It also has a 0.06% expense ratio, so investors get to keep almost all of the gains. It seems good on paper, but there are a few details that make me wonder why SCHD gets so much hype. It's frequently praised in dividend subreddit posts, but its returns are lackluster compared to other options."
"Most of the fund's 45% gain over the past five years came in a small window in the back half of 2020. Many stocks soared during this time as the Federal Reserve pumped record-breaking money into the system and slashed interest rates. It was a pretty dramatic financial injection into the system, so almost every stock performed well during that stretch. However, SCHD only has an annualized 8.9% return over the past three years. It's even worse that the fund only has a 2.8% return over the past year."
SCHD delivered a 45% return over five years with a 3.75% SEC yield and a 0.06% expense ratio. Much of the five-year gain occurred during the back half of 2020 when Federal Reserve stimulus and rate cuts lifted many stocks. SCHD's annualized return was 8.9% over three years and just 2.8% over the past year. The S&P 500 returned 15.9% last year and an annualized 14.7% over five years, both outperforming SCHD. High yield and low fees do not guarantee superior total returns versus broader benchmarks or growth-focused ETFs.
Read at 24/7 Wall St.
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