Should Schwab U.S. Dividend Equity ETF (SCHD) Be on Your Investing Radar?

If you're interested in broad exposure to the Large Cap Value segment of the US equity market, look no further than the Schwab U.S. Dividend Equity ETF (SCHD), a passively managed exchange traded fund launched on 10/20/2011.

The fund is sponsored by Charles Schwab. It has amassed assets over $55.18 billion, making it one of the largest ETFs attempting to match the Large Cap Value segment of the US equity market.

Why Large Cap Value

Companies that fall in the large cap category tend to have a market capitalization above $10 billion. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.

While value stocks have lower than average price-to-earnings and price-to-book ratios, they also have lower than average sales and earnings growth rates. Considering long-term performance, value stocks have outperformed growth stocks in almost all markets; however, they are more likely to underperform growth stocks in strong bull markets.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.06%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 3.37%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Industrials sector--about 17.10% of the portfolio. Financials and Healthcare round out the top three.

Looking at individual holdings, Verizon Communications Inc (VZ) accounts for about 4.54% of total assets, followed by Amgen Inc (AMGN) and Broadcom Inc (AVGO).

The top 10 holdings account for about 40.25% of total assets under management.

Performance and Risk

SCHD seeks to match the performance of the Dow Jones U.S. Dividend 100 Index before fees and expenses. The Dow Jones U.S. Dividend 100 Index is designed to measure the performance of high dividend yielding stocks issued by U.S. companies that have a record of consistently paying dividends, selected for fundamental strength relative to their peers, based on financial ratios.

The ETF has gained about 5.10% so far this year and is up roughly 15.86% in the last one year (as of 03/26/2024). In the past 52-week period, it has traded between $66.90 and $79.87.

The ETF has a beta of 0.87 and standard deviation of 14.63% for the trailing three-year period, making it a medium risk choice in the space. With about 104 holdings, it effectively diversifies company-specific risk.

Alternatives

Schwab U.S. Dividend Equity ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, SCHD is a sufficient option for those seeking exposure to the Style Box - Large Cap Value area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell 1000 Value ETF (IWD) and the Vanguard Value ETF (VTV) track a similar index. While iShares Russell 1000 Value ETF has $55.28 billion in assets, Vanguard Value ETF has $113.91 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.

Bottom-Line

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.

Get it free >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Schwab U.S. Dividend Equity ETF (SCHD): ETF Research Reports

Verizon Communications Inc. (VZ) : Free Stock Analysis Report

Amgen Inc. (AMGN) : Free Stock Analysis Report

Broadcom Inc. (AVGO) : Free Stock Analysis Report

Vanguard Value ETF (VTV): ETF Research Reports

iShares Russell 1000 Value ETF (IWD): ETF Research Reports

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Tags

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for the TradeTalks newsletter to receive your weekly dose of trading news, trends and education. Delivered Wednesdays.