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

Looking for broad exposure to the Large Cap Value segment of the US equity market? You should consider the Schwab U.S. Dividend Equity ETF (SCHD), a passively managed exchange traded fund launched on October 20, 2011.

The fund is sponsored by Charles Schwab. It has amassed assets over $112.02 billion, making it the largest ETF attempting to match the Large Cap Value segment of the US equity market.

Why Large Cap Value

Companies that find themselves in the large cap category typically have a market capitalization above $10 billion. Considered a more stable option, large cap companies boast more predictable cash flows and are less volatile than their mid and small cap counterparts.

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. While value stocks have outperformed growth stocks in nearly all markets when you consider long-term performance, growth stocks are more likely to outpace value stocks in strong bull markets.

Costs

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining 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 2.98%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Healthcare sector -- about 21.7% of the portfolio. Consumer Staples and Energy round out the top three.

Looking at individual holdings, Unitedhealth Group Inc (UNH) accounts for about 4.49% of total assets, followed by Merck & Co Inc (MRK) and Home Depot Inc (HD).

The top 10 holdings account for about 41.86% 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 30.22% so far this year and was up about 29.72% in the last one year (as of 08/25/2026). In the past 52-week period, it has traded between $26.44 and $35.21.

The ETF has a beta of 0.67 and standard deviation of 12.96% for the trailing three-year period, making it a medium risk choice in the space. With about 103 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 good 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 Morningstar Value ETF (VTV) track a similar index. While iShares Russell 1000 Value ETF has $84.21 billion in assets, Vanguard Morningstar Value ETF has $193.43 billion. IWD has an expense ratio of 0.18% and VTV charges 0.03%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

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.

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This article originally published on Zacks Investment Research (zacks.com).

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